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By Al Yoon

NEW YORK, Feb 13 (Reuters) - Morgan Stanley and Bear Stearns issued the first commercial mortgage-backed securities deal of the year on Wednesday after agreeing to sweeten yields on a $1.2 billion issue, according to sources.

The deal came as dealers try to restart a market sidelined by the global credit crunch. Soaring yields on existing CMBS and benchmark indexes since December have stunted issuers' ability to pare commercial loan inventories and free up funding for new ventures.

Expectations of rising delinquencies and bond rating downgrades this year have steered investors away from the market.

The issue's largest portion was a $629.6 million "AAA" rated class, priced at a yield of 235 basis points over interest-rate swaps, compared with dealer guidance of 200 basis points on Monday, said two investors familiar with deal. Based on Wednesday's 10-year swap rate, the total yield would be about 6.77 percent.

Other parts of the "MSC 2008-TOP29" issue were priced at yields 25 basis points to 140 basis points above initial price talk, they said. Yields on lower rated portions ranged from swaps plus 590 basis points for "AA" rated bonds to swaps plus 1,150 basis points for "BBB-plus" rated securities.

The CMBS is a collection of 82 loans from three sellers assembled as a "conduit" by dealers. Wells Fargo & Co. (WFC.N: Quote, Profile, Research), a typical seller into the "TOP" series, chose not to participate, said a dealer on a conference call last week.

A $1.76 billion CMBS issue that included Wells Fargo loans and assembled by Morgan Stanley and Bear Stearns in October was priced with spreads on the top "AAA" class at 44 basis points.