CDOs/CLOs

Production volume in the securitization market was low last week, as market participants came off of the third quarter's end and a holiday weekend. Still, distressed-debt funds and choosy investors kicked up enough dust to let the market know they would be choosy about the kinds of debt they buy, at least for the time being.

Independent data and trade processing firm Markit launched the first tranched LCDX last Wednesday, with market players forecasting that a new crop of investors would take an interest in the product and create liquid trading conditions.

The Royal Bank of Canada is preparing to issue a 15 billion ($21 billion) covered bond program to finance a pool of mortgages. The Global Covered Bond Programme represents the first issuance of covered bonds backed by Canadian assets.

When the asset-backed - and especially the mortgage-backed - securities markets came screeching to a halt over the summer, market participants were afraid to post bids and offers on the often highly illiquid securities because no one knew their values and there was no forum for adequate price discovery.

Liability spreads in the ABS CDO market may continue to push out as issuance remains at a standstill. But with the pickup in new deals in the CLO sector, similar widening appears to have ended with the third quarter.

Securitization pioneers Lewis Ranieri and Marcia Myerberg are back in the mortgage finance world with a new venture, an Internet business that links consumers directly with mortgage lenders, thrifts and commercial banks, bypassing mortgage brokers. Called Root Markets, the new business will be linked to Internet portals and newspaper sites.

The third quarter turned out to be a very slow and painful period for the asset securitization market. Issuance was a mere $114.4 billion during the period, which represented a 60% plunge from the same quarter last year, according to information from global research firm Dealogic.

Citigroup Global Markets managed to claim the top position among U.S. ABS CDO managers, according to Thomson Financial, despite a recent announcement that the bank is facing losses on $1.3 billion in pretax subprime MBS collateral, CDO positions and leveraged loans warehoused for future CDOs.

Outstanding paper in the asset-backed commercial paper market might have pulled back since August, but new vehicles are still cropping up. Deutsche Bank, for one, launched a so-called feeder conduit called Montage Funding recently.

Everyone needs a helping hand at some point in life. Such was the case with me when, at four or five years old, I managed to topple a freestanding, double-sided chalkboard on myself while playing in an empty classroom at my local school. I do not know how long I lay under the chalkboard before my excellent aunt lifted that weight off of me, but I recall having just enough lung capacity and strength to belt out the loud, long screams it took to summon her to my aid.