Negative net supply, insatiable demand, and risk retention requirements compress AAA/BBB spreads.
Increasing apartment supply and the strength of the industrial sector reshape market dynamics in 2017.
We expect volatility to pick up, but fundamentals are strong.
Foreign demand is likely to drive spreads tighter despite healthy supply.
Monitoring credit implications of macro and micro factors.
Low supply, improving fundamentals, and investable scale form a constructive backdrop.
Watch for a possible trade up in quality as credit spreads stay tight.
We expect investors to harvest gains unless we see more concrete legislative progress on fiscal policy in Washington.
With CLO debt at post-crisis tights, we prefer less credit risk and spread duration.
The likelihood that rates will rise means that prepayment risk has decreased dramatically.
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