CDOs/CLOs

Early in the asset-backed securities production week, issuance was so slow that one trader said he thought investors had already snatched up whatever attractive paper was on the table.

Cohen and Co. is in the market with a $408 million cash-flow trust preferred CDO, ALESCO Preferred Funding XVII. The deal will be the 22nd trust preferred transaction completed by Cohen & Company Financial Management and its affiliates, but it might not be the most profitable. Market players speculate that the company might only break even, if not take a loss on the transaction, in a move they see as an effort to promote market liquidity.

WASHINGTON - Almost as soon as the news broke that some of the largest U.S. banks had agreed to create a fund to relieve problems in the commercial paper market, proponents of the Basel II capital accords began arguing that the situation would have looked significantly different had the new standards already been in place.

No surprise here: ABS East Conference delegates are concerned that the weakness in the subprime mortgage market is expanding to affect the overall market for securitized assets, according to an Information Management Network survey.

As of press time, remittance data was out for 19 of the 80 ABX reference deals and not surprisingly October brings more headaches to the mortgage market. For all four indices, the average size of the monthly increase continued to grow, Deutsche Bank analysts said in a report.

Utility companies once turned to the securitization industry to recover what it called stranded costs - actually stranded profits - as they surrendered monopolies in their respective markets through mandatory deregulation.

The securitization market completed about $9.8 billion in transactions during the last two weeks, according to data from UBS. Although that amount is a fraction of what is normally issued in any given two-week period, traders and issuers appear to be getting used to it.

New issuance in the U.S. CDO market remains dormant amid continued ratings instability. But the center of gravity seems to be moving east for CDOs as an increasing number of transactions are popping up overseas, particularly synthetic structures.

The Brooklyn U.S. attorney has started an investigation into the collapse of the two Bear Stearns hedge funds - its High Grade Structured Credit Strategies Master Fund and its High Grade Structured Credit Strategies Enhanced Leverage Master Fund - that had subprime exposure, sources familiar with the matter said.

About a month ago, amid the turmoil that caused about $80 billion in securities to evaporate from the structured investment vehicle (SIV) market, Moody's Investor's Service suggested that bank sponsorship might make the difference between normal operations and the wind down of much of that market.