CDOs The growth of structured credit
The steady tightening of cash bond spreads has driven a growing number of investors to the collateralized debt obligation market in search of yield. Structurers have responded with ever more innovative products. Simon Boughey and Alan McNee examine the success of existing products and the rise of new ones
Rising investor acceptance and sophistication has resulted in structured credit products becoming conventional tools for adding yield. The strength of the collateralized debt obligation (CDO) market last year had a marked influence on the cash bond market, forcing spreads to tighten for 29 out of 30 consecutive trading sessions running up to mid-September.
The compressed spread environment has been problematic for structurers, as the expensive levels of underlying assets restricted the
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