medium · Asset-Backed Securities asset-nuances
If a CMBS loan is 'defeased', what is the impact on the Interest-Only (IO) bond holder referencing that loan?
- Unfavorable, as the IO strip is immediately terminated
- Neutral, as there is no change in cash flow or credit
- Unfavorable, because the Treasury rate is lower than the loan rate
- Favorable, as credit risk is replaced by Treasury collateral
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