Dealing with default

Australia's retail investors have snapped up a wide variety of CDO investments over the past three years. But have the downgrades of Ford and General Motors, and the recent default of US auto parts manufacturer Delphi, soured investors' views?


It may be too soon to sound the all clear, but the signs are promising that Australia's collateralised debt obligation (CDO) market will emerge from this year's volatility in the US auto sector relatively unscathed. In other respects, however, the year has been an anti-climax for CDO issuers, as tight credit spreads have worked against new retail issues and led to a repricing of risk in the institutional market.

Arrangers have responded by improving their products, typically by introducing

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