NEW YORK CITY—The past year has seen CMBS credit metrics improve marginally over deals that came to market in over the two previous years, Fitch Ratings said Thursday. However, the ratings agency also sees continued “bar-belling” between stronger and weaker loans in a securitization.

“Bar-belling is an issue because the stronger loans will not make up for losses that the weaker loans in the deal may incur,” says managing director Stephanie Petosa. The presence of those stronger loans may boost overall pool-wide statistics, thus masking the presence of the weak links. Additionally, Petosa says that interest-only loans are up to nearly 75% this year from 66.6% in 2016, “though many IO loans in 2017 deals had lower LTVs which will help curb refinance risk.”

Further, Fitch sees a couple of negative trends continuing. Along with the number of IO loans, the Fitch “haircut” to the issuer's underwritten cash flow continued to rise in '17. Likewise, single-tenant exposure and loans with additional subordinate debt increased over the past 12 months.