CMBS Weekly: Relative Value for the Second Half

Research evidence excerpt

CMBS Weekly: Relative Value for the Second Half

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17 Jul 2026 17:56:07 ET │ 25 pages

CMBS Weekly

Relative Value for the Second Half

CITI'S TAKE

Jeffrey Berenbaum AC

We anticipate range-bound spreads for the remainder of the year, but see +1-212-816-8399

risks asymmetrically skewed toward widening on macro and technical jeffrey.s.berenbaum@citi.com

concerns. We find CRE CLOs attractive across the capital stack, offering

compelling risk-adjusted returns with lower volatility and higher Aditi Memani

subordination than conduits. We also prefer 5YR conduit double-As, hotel +1212-723-9356

SASB, and high-quality office SASB for their relative value, while Agency aditi.memani@citi.com

CMBS remains a viable cash proxy.

Seeking Carry — Our base expectation is a range-bound rate environment, creating

an asymmetric imbalance with increasing widening potential. Robust CMBS supply

will continue into the second half, which may require more compensation to absorb.

We remain sanguine on the real estate fundamental backdrop, seeing steady to

improving cashflow growth across sectors.

CRE CLOs Offer Attractive Relative Value — We find CRE CLOs attractive across the

capital stack versus conduits. CRE CLOs exhibit lower excess return volatility and

offer higher credit enhancement, with subordination levels 5% to 10% higher than

comparable conduits. CRE CLO delinquency has improved to 3.3%, while conduit

delinquency lingers above 8%. We see CRE CLO triple-Bs as optimal compared to

corporate CLO mezz, offering similar spread at a lower volatility level.

SASB Sector Preferences — We prefer hotel SASB, high-quality office SASB, and

see value in retail fixed-rate triple-Bs. Our analysis of spread-per-certificate LTV

finds office and hotel floating-rate triple-As most attractive.