From the end of September 1999 to the end of September 2000, outstandings in the asset-backed commercial paper market grew 27.8% to $596 billion from $467 billion, according to the Federal Reserve Bank.

Further, at the start of 2000, predictions for year-end volume were in the $600 billion range, just $4 billion over current levels.

"For partially and fully enhanced ABCP, the fourth quarter is normally the busiest quarter," said Eric Hedman, an analyst in the asset-backed surveillance group at Standard & Poor's Ratings Services.

"The $600 billion estimate that a lot of the dealers and issuers had come up with looks like it's going to be on the low end," Hedman added.

Janice Murray, a principal in the asset-backed commercial paper group at Morgan Stanley Dean Witter, calls year-end volume at approximately $620 billion.

"Although year-over-year growth will remain in double digits for 2000, the absolute dollar amount will be down for the first time in a few years," Murray said. "We still do see a very active fourth quarter."

For example, from 1998 to 1999, outstandings grew from $382 billion to $521 billion, a $139 billion increase compared to the $120 billion increase the market will likely see by the end of this year. Similarly, from 1997 to 1998, the market jumped $126 billion in size.

Meanwhile, the use of ABCP for securities arbitrage programs continues to be a trend. That segment of the market accounted for approximately 22% of the total outstandings at the end of the second quarter, compared to 14% at the end of 2Q1999.

"Three or four years ago, the market was really trade receivables, and now more and more of the market is securities arbitrage vehicles, purchasing rated paper," S&P's Hedman said.

"Certainly a large part of that growth is attributable to CBO, CLO and CDOs," he said.

"You're seeing basically the securities portion of the market getting closer to the trade portion, which has been coming down."

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