CMBX Index

A recent Wall Street Journal article discusses the CMBX index and it's use in predicting the default risk of commercial real estate. Even though there are very few current defaults, this index now suggests that there is trouble to come.

This is a derivative index that is based on the pricing of bonds backed by commercial real estate. In simple terms it represents to cost of insurance against default - which is a good measure of risk.

The alarming thing is that this index has been going up of late which would seem to indicate a stormy future for commercial real estate.

This chart shows the index for AAA rated commercial real estate bonds:

Tech Note: I could not find this index on popular finance sites. The above chart is published through an iframe that is fed from Markit.com, the creator of the index.