What explains the strong rally in AA-rated Commercial Mortgage Backed Securities (CMBS)?
From mid-April to the present, prices of the AA tranches have more than doubled. Given predictions of doom in CMBS default rates, that is a strange result. As a matter of fact, the Congressional Oversight Panel for the TALF program is deeply concerned about such toxic assets…. The price increase for toxic assets is driven by government-financed buying programs under PPIP.
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