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After ominously shorting residential mortgage bonds before the last financial crisis, Deutsche Bank is once again going against the grain, advising investors to bet against commercial mortgage backed securities.
The bank said CMBS bonds are weak because they are largely supported by leases from retailers, many of which are struggling, Bloomberg reports. Deutsche bank analysts said it would only take a combination of more store closures and bankruptcies to pull down the system, especially considering the pressure e-commerce has been putting on it for years.
In particular the bank said investors should bet against commercial mortgage bond indexes from 2012 and 2013, which have a larger exposure to malls than recent indexes. And the lender should know what it is talking about — it was the largest underwriter of commercial mortgage bonds in both 2012 and 2013.
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