A CMBX index is a tool used to track the market for CMBS (commercial mortgage backed securities). It is 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.

The existence 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. The actual interest rate on a CMBS loan will generally be based on current U.S. Treasury swap rates, which often is lower for CMBS loans than for traditional commercial property mortgages.

The CMBX index provides investors with the ability to take both long and short positions on CMBS, allowing them to work within their own risk profiles. Additionally, CMBX indexes can reveal important trends for commercial real estate borrowers who are considering taking out CMBS financing. The fact that they exist also typically reduces prices for CMBS borrowers.

The advantages of CMBS financing include flexible underwriting guidelines, fixed-rate financing, and fully assumable loans. Lenders and bondholders can potentially achieve a higher yield on investments.

The CMBX index affects the pricing of CMBS loans by increasing trade volume and demand, making it easier for borrowers to obtain conduit loans from lenders. The fact that CMBX indexes exist typically reduces prices for CMBS borrowers. 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. Source and Source

The risks associated with investing in a CMBX index include dishonest tranche ratings, which can have serious negative effects for borrowers and investors. Additionally, CMBX indexes are gauged by using 25 tranches, or credit levels, of conduit loans, and the highest tranches represent the lowest-risk, lowest-return loans, while the lowest tranches represent the highest-risk, highest-return loans. This means that investors may be taking on higher risk investments when investing in a CMBX index.

Sources:

• cmbs.loans/blog/what-is-a-cmbx-index
• apartment.loans/posts/cmbs-explained

The CMBX index is a unique index that tracks the market for CMBS (commercial mortgage backed securities). It is 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. This index is 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.

In comparison, other commercial real estate indices are used to gain insight into where the market may be headed. These indices are simply one piece of data that investors and developers can utilize to gain a balanced perspective before making a business decision. However, individual property value is essential; and so are local market factors.