Market Data
waterfall_chartSecuritization

Bond Tranche Waterfall

Understand CMBS deal structure, tranche waterfall mechanics, and capital stack positioning in today's market.

Data as of FRED as of 2026-10-28 · Sources: Federal Reserve (FRED), CoStar, CBRE Research
10Y Treasury
5.05%
FRED DGS10

CMBS Tranche Waterfall

Click any tranche to see detailed risk profile, buyer base, and market conditions.

AAA Tranche Details

Senior-most tranch, first to receive principal and interest. Investors typically hold to maturity.

Deal Proportion
65%
Spread Above SOFR
140-160bps

Typical Buyer Base

Pension fundsInsurance companiesJapanese banksMoney managers

Cash Flow Waterfall Mechanics

How Cash Flows Through the Waterfall

1. Principal & Interest Collections
  • Loans pay monthly P&I
  • Servicer collects payments
  • Trustee aggregates balance
↓
2. Distribution Down Waterfall
  • AAA receives full coupon first
  • AA, A, BBB follow in order
  • Equity receives residual
Key Point: If loan defaults or losses occur, junior tranches absorb losses FIRST. For example: if a $100M deal has $5M in losses, it affects Equity (2%) and BB (5%) fully, but AAA, AA, A, BBB are protected.

CMBS vs. Balance Sheet Lending

CMBS Securitization

  • Wider distribution of credit risk
  • Execution timelines 90-150 days
  • Multi-tranche structure (AAA-Equity)
  • Transparent pricing, marked to market
  • Better for large/$100M+ deals
  • Higher upfront cost, rated by agencies

Balance Sheet Bank Loan

  • Concentrated on bank balance sheet
  • Faster closure: 45-75 days typical
  • Simpler structure (senior/mezz)
  • Pricing less transparent, hold-to-maturity
  • Better for smaller/$5-75M deals
  • Lower upfront cost, faster amendments

Market Insights

trending_down

Volume Collapse

CMBS delinquencies peaked at 5.21% in Q1 2026, then improved to 4.82% in Q2 — first quarterly drop in four quarters. Office and lodging most stressed.

shield

AAA Resilience

AAA tranches remain sought-after. Spreads stable at 140-160bps. Institutional capital available.

warning

Equity Distress

Equity value compressed to near-zero in current market. Recovery contingent on spread compression.

speed

SASB Growth

Single-asset structures gaining share (30-40% of mix) due to speed and simplicity.

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CMBS structures and tranche details are for educational purposes only. Actual deal structures, ratings, and risk profiles vary significantly by securitization and market conditions. This page is not investment advice. Consult with your investment team and review offering documents before participating in any CMBS transaction. Past performance does not indicate future results.

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