When people say that the CMBX spread, for example, is 300 bps on a BBB rated security, what bechmark are they referring to? Put another way: when someone uses the term spread I think of it as spread over something, may be Treasury, may be LIBOR. So what is the spread that the CMBX refers to? I don’t think the CMBX spread has anything to do with Treasury or LIBOR. As far as I know, the CMBX spread of 300 bps means a CDS contract where I, as a protection buyer, will pay 300 bps times notional to the seller of the CDS contract, the protection seller. So what is this CMBX “spread?” Is this a misnomer?
you’re right about what it actually means but people typically look at it as a spread to swaps.
they are quoted as a spread over treasury with comparable life to the bond.
Not sure about CMBX, however CDS spreads are quoted against the swap rates (T+swap spread). Usually CDS < corporate bond spread given the fact that swap spreads are mostly positive.
Thanks. Given that the CMBX index is made up of 25 traches of CMBS, each with different credit rating, how does one know which Treasury maturity is being considered? If, for example, I look at on-the run AAA CMBX index and I see that the spread is, say, 500 bps (this is how the CMBX reports the spread by ratings), what Treasury maturity, as a benchmark, is being used here?