CMBX and CMBS Loans
CMBX indexes track the market for CMBS (commercial mortgage backed securities), securities that themselves are backed by CMBS loans. CMBX indexes are an invaluable tool for investors who want to invest in CMBS, but they can also reveal important trends for commercial real estate borrowers who are considering taking out CMBS financing. However, perhaps more importantly, the creation of CMBX indexes greatly increases CMBS trade volume and demand, making it much easier for borrowers to obtain conduit loans from lenders. The fact that they exist also typically reduces prices for CMBS borrowers.
How CMBX Indexes Work
CMBX indexes are gauged by using 25 tranches, or credit levels, of conduit loans. The highest tranches represent the lowest-risk, lowest-return loans, while the lowest tranches represent the highest-risk, highest-return loans. These indexes are recalculated every six months as new loans are placed in CMBS issuances and old (or non performing) loans are removed. CMBX allows investors to take both long and short positions on CMBS.