Citigroup strategists suggest that AA tranches of CDOs of asset-backed securities may be more vulnerable to downgrade than BBBs

Subprime has been one of the main focal points during the recent sell-off, if not necessarily its cause. But we reckon the effect on CDOs of ABS may be more interesting than on subprime itself - and considerably less priced in.

Unlike CLOs, US CDOs of ABS seem to be relatively undiversified. Put better, the individual BBB and BBB ABS tranches within CDOs of ABS are actually quite well diversified.

Rather than being concentrated in particular regions, they tend to span several - even if there is

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