U.S. CDO issuance has continued its rapid growth thus far in 2007, despite contraction in the subprime market, which has traditionally been a popular source of collateral. But the investment vehicle may be running out of fuel as market players credit its solid year-to-date performance as spillover from 2006.

Indeed, CDO issuance so far this year is at $142.1 billion, up from $103.6 billion for the same period in 2006, according to data provider Dealogic. While the number of transactions in the first quarter of 2007 was lower than in the final quarter of 2006, the number and volume of transactions were up 100% over the first quarter of 2006, and 2006 was up more than 60% over 2005, according to a recent report from Moody's Investors Service.

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