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NEW YORK CITY-During the 1990s, the average annual default rate for commercial mortgage-backed securities was well below the average annual default rate for corporate bonds, according to a new report from Fitch, the international rating agency based here. “Particularly striking is the performance of non-investment grade bonds, where CMBS bonds have a significantly lower average annual default rate than corporates,” says Janet Price, Fitch group managing director.

During the last ten years, the default rate on non-investment grade CMBS bonds was 0.14%, well beneath that of 3.07% for non-investment grade corporates. The CMBS average default rate for all bonds ranged between 0.07% and 0.10%, which reflects default rates measured by dollars and by issuers/class, while the rate for corporate bonds fluctuated between 1.51% and 2.41%.

“One explanation for the low CMBS default rate is the diversification that comes from multiple assets, multiple borrowing entities and multiple tenants,” says Diane M. Lans, senior director of the company. She also notes that even though some of the highest corporate default rates were in retail outlets, supermarkets and drug stores, which affect the real estate market, there was no impact from these defaults on the CMBS bond defaults.

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