Yield boost for CDOs

Efforts to enhance the yield of CDOs have resulted in structurers including high-yield assets in investment-grade CDOs. Could this pave the way for pure high-yield CDOs? Laurence Neville reports

For many investors, the hunt for yield in the collateralized debt obligation (CDO) market is becoming an increasingly frantic and, in many cases, fruitless activity. Part of the reason for this, says Olivier Vigneron, director and co-head of Europe and Asia correlation trading at Deutsche Bank, is that the traditional five-year investment-grade underlying has seen an unprecedented tightening in spreads.

Many investors are now turning to synthetic CDOs, often now referred to as