CMBX, the new synthetic commercial mortgage-backed securities index that started trading March 7, has so far produced disappointing results. Traders would not say how much volume they expected to see on CMBX, but agreed the first weeks of trading were less active than expected. The index is administered by Markit Group on behalf of a consortium of banks.
The index saw no more than $500 million of trades on Friday March 10th and saw just $200 million of trades the previous day. By comparison, ABX, a synthetic asset-backed securities index that is also administered by Markit Group, saw more than $1 billion of trading in its first day. Trading has been one-sided so far, with protection sellers from Street accounts dominating trading and driving spreads tighter, traders said.
Markit Group believes that activity will pick up as more investors become educated and comfortable with synthetics. Specifically, new activity is expected to be focused on mezzanine credits, where credit issues are more prevalent, as well as vintage credits where investors can take a firmer position. Markit Group also could market the index in a road show, traders said. Ben Logan, director of product development at Markit, did not return calls.
Traders noted, however, they did not expect CMBX volumes to rival ABX, which since Jan. 19 has seen more than $12 billion in trades. This is because residential mortgage-backed securities, which are included in ABX, is a bigger market. “Still, I think people were disappointed,” a trader said.