Higher interest rates have battered bondholders after office buildings were already suffering from vacancies. A pullback from banks could add stress. GMO, meanwhile, is buying highly rated mortgage bonds backed by commercial real estate, known as CMBS.
The additional yield offered by the highest-rated CMBS when compared with Treasurys has increased, while corporate-debt yields have barely budged. The regional banking panic helped send CMBS to their cheapest prices relative to investment-grade corporate bonds on record by March.
