CDOs: the growth of structured credit

As cash bond spreads tightened in 2004, structurers of collateralised debt obligation products have become more innovative in search of yield. 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 collateralised 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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