Simmering beneath the surface and unbeknownst to most is a pronounced...

Simmering beneath the surface and unbeknownst to most is a pronounced deterioration in commercial real estate. The evidence is can be seen in widening spreads in the tranches of Commercial Mortgage Backed Credit Default Swap Benchmark CMBX Indices. Commercial real estate problems are in addition to massive problems in the guarantee business as evidenced by the huge widening of spreads on the two largest bond guarantee companies, Ambac Financial Group (ABK) and MBIA Inc (MBI).For more on the systemic risk in the bond guarantee business, please see a Downward Spiral of Deep Junk. Rising spreads represent a greater chance of default. In commercial real estate, most spreads are now wider than they were in the peak of the mid-summer credit crunch. This indicates two things:

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