It’s a good question, Godzilla.
As others said: The exposure to Commercial Backed Securities is minimal, only 1.8%. And the vast majority of the CMBS deals are totally fine. Let‘s assume that 10% of them wouldn’t pay anything back (which is an extreme assumption and not at all likely), it would represent .18% of the value of BND. You wouldn‘t even notice it. Swings in BND due to interest rate changes are a lot bigger.
When you read in the news that offices and certain multi family areas have lost 25% or 30% in value, remember the equity owners have typically at least that much equity in deals, so worst case the equity holders get wiped out but the bond holders are fine. And even if bond holders theoretically had losses, you wouldn’t receive 0 cents on the dollar, but maybe 85, 90 or 95.
As others said: The exposure to Commercial Backed Securities is minimal, only 1.8%. And the vast majority of the CMBS deals are totally fine. Let‘s assume that 10% of them wouldn’t pay anything back (which is an extreme assumption and not at all likely), it would represent .18% of the value of BND. You wouldn‘t even notice it. Swings in BND due to interest rate changes are a lot bigger.
When you read in the news that offices and certain multi family areas have lost 25% or 30% in value, remember the equity owners have typically at least that much equity in deals, so worst case the equity holders get wiped out but the bond holders are fine. And even if bond holders theoretically had losses, you wouldn’t receive 0 cents on the dollar, but maybe 85, 90 or 95.
Statistics: Posted by ge1 — Thu Sep 05, 2024 4:59 pm — Replies 13 — Views 2311