Subprime: the burning issue for CDO investors

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Residential mortgage-backed securities (RMBS) have been a favoured source of collateral for CDO structurers for some years. Steady and growing supply as the US housing market expanded drove the trend early in this decade, leading latterly to issuer enthusiasm for subprime mortgage loans.

According to Fitch Ratings, deals closing in the first half of 2006 had a 64% concentration of US subprime RMBS, up from 48% in the first half of 2005. Over the same period, concentration limitations - the ca

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