The AI (ChatGPT) Bond Investing Handbook: Agency CMBS

Here is the response from ChatGPT for the prompt CMBS agency entered on February 25, 2023.

Agency CMBS (Commercial Mortgage-Backed Securities) are securities that are created by pooling together a group of commercial mortgages and then selling securities based on the cash flows generated by those mortgages. These mortgages are typically insured or guaranteed by government-sponsored entities such as Fannie Mae, Freddie Mac, or Ginnie Mae.

The agency CMBS market is a significant part of the overall commercial mortgage-backed securities market. These securities are generally considered less risky than non-agency CMBS, which are backed by mortgages that are not insured or guaranteed by government-sponsored entities. As a result, agency CMBS typically have a higher credit rating and are more liquid than non-agency CMBS.

Investors in agency CMBS receive payments based on the principal and interest payments made on the underlying commercial mortgages. These payments are passed through to investors in the form of interest and principal payments on the securities. Investors can also buy and sell agency CMBS on secondary markets, which helps to increase liquidity.

Overall, agency CMBS provide investors with an opportunity to invest in a diversified pool of commercial mortgages while also receiving a steady stream of income from the interest and principal payments on those mortgages. These securities may be attractive to investors who are looking for a relatively safe fixed-income investment with higher yields than comparable government bonds.

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