Markit added an AJ tranche - the most subordinate of the AAA rated tranches - to the on-the-run Markit CMBX 4 index when it rolled in October last year. The new tranche has now been added to the off-the-run Markit CMBX 1, Markit CMBX 2 and Markit CMBX 3 indices as well.
The Markit CMBX is a synthetic family of indices based on U.S. commercial mortgage-backed securities (CMBS) which provides investors with liquid, transparent exposure to CMBS of a unique vintage. Each CMBX index references a basket of 25 of the most recently issued CMBS deals.
The seven index tranches reference bonds rated AAA, AJ, AA, A, BBB, BBB- and BB respectively. Ratings are required from at least two of the following rating agencies: Fitch, Moody's and Standard & Poor's. A new series of CMBX is issued every six months.
The CMBS reference obligations are selected using the following requirements: deals must have a minimum size of $700 million; they must be secured by at least 50 separate mortgages that are obligations of at least 10 unaffiliated borrowers; no more than 40% of the underlying mortgages can be secured by properties in the same state; and no more than 60% of the properties can be of the same property type.
Licensed Dealers of the Markit CMBX include: Bank of America; Barclays; Bear Stearns; Calyon; Citi; Countrywide; Credit Suisse; Deutsche Bank; Goldman Sachs; JPMorgan; Lehman Brothers; Merrill Lynch; Morgan Stanley; Nomura International; RBS Greenwich Capital; UBS; and Wachovia.