I had wanted to buy non-agency CMBS...but Not Now...

I had wanted to buy non-agency CMBS because its spread seems so attractive against agency MBS and CMBS and other SSA securities. Moreover it would be less vulnerable than corporate bonds I thought as well as the price is cheaper.

But, J.P.Morgan warns CMBS would be more vulnerable than agency MBS and other I.G. corporate bond because of FRTB (Fundamental Review of the Trading Book) which is a part of Basel III accord. It maybe published by end of this year.

If it is realized, the bank traders will have incentives to buy agency MBS rather than non-agency securities. So, JPM concerns the liquidity problem could arise although the price seems somewhat cheaper now. They say this theme would continue next year.

So, I change the plan to increase credit position. The priority is not non agency CMBS any more, but the corporate bonds despite the burden of issuance. This burden could give a chance to buy.