CMBX Spreads - Blowing out or bear raid?

If anyone has taken a gander at the CMBX spreads these days, one will be shocked to note that CMBX spreads have skyrocketed in the last two weeks. AAA CMBX is yielding 700bps, AA 2300bps, and BBB 3750bps. CMBX's are essentially credit default swaps referencing certain Commercial Mortgage Backed Securities (CMBS). CMBS are essentially various commercial mortgages collateralized into a security. You can consider CMBX's tradable insurance against default of the underlying CMBS, and the yield the cost of that insurance. So to insure AAA CMBS costs 7%, AA 23%, and BBB a whopping 37.5%. A credit default swap of 3750bps is indication of imminent failure - Washington Mutual and Indymac debt was trading at similar levels right before they failed.

SO IS CMBS FAILURE IMMINENT?????

The CMBX spreads seem to say so. But not so fast - this brings back memories of the bear raids against the commercial and investment banks not so long ago. How does this work? Essentially hedge funds can coordinate to bid up the price of the CMBX spreads by offering ever higher bids while at the same time shorting the stock of the holders of this debt (or just commercial REITS in general). By successfully driving up the price of the CMBX, the hedge funds create the illusion of imminent failure, which causes the stock price of the CMBS holders to plummet. And of course these hedge funds will have large short positions in these stocks, which means big profits for the funds.
So while the popular media is focusing on CMBX spreads blowing out - the situation itself may not necessarily be that dire.

-GH