commercial mortgage back bond spreads continue to widen

From realpoint, a CMBS tracking company under CapMark:

May 03, 2007
The turmoil in the CMBS market has filtered down to deals' B-pieces, which have seen their yields climb sharply in recent weeks.

Spreads on bonds rated BB+ down to B- are now some 100 basis points wider than they were several weeks ago, before the massive spread widening hit deals' more senior classes. And the yield that B-piece investors are demanding for deals' unrated tranches have spiked by 10-20 percent to roughly 22-24 percent.

Not only are area yields up, but B-piece buyers are said to now have more leeway in the volume of loans they kick out of potential securitizations.

The result is that lenders have widened the spreads on their mortgages by 5-10 bp.

...
Unrated tranches were said to have been trading for up to 1,500 bp over Treasurys, which would have placed a yield of 19.5 percent on them. Their yield is now at or near 24 percent.

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But the spread widening has been welcomed by many bond investors who long have fretted that credit standards had weakened substantially.

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"This is a good sign," [an investor added], saying that it could save the industry from ultimately facing a major meltdown.

Toll Brothers sued by shareholder

A shareholder has filed a lawsuit against Toll Brothers Inc., claiming the luxury homebuilder inflated its stock prices by misleading investors about the strength of the company's position in the housing market.

The suit states that while executives for the Horsham-based company were telling investors the luxury home market was “tremendous” and the company was on track to grow 20 percent in a year, demand for its homes was actually shrinking, and it didn't have enough inventory to achieve that promised growth.

“Nothing was more important to them than convincing the public marketplace that they were continuing to open new selling communities, maintaining high levels of traffic in Toll Brothers' existing communities, continuing home price appreciation to generate "inventory profits,' and continuing to grow at the 20 percent rate, because their jobs and millions of dollars in salaries, bonuses, stock option profits and other benefits depended on their doing so,” the lawsuit states.