As European banks and the broader financial markets situate themselves for the impending implications of Basel II, market participants are noting - and speculating on - a number of changes to come within the growing CDO sector.

European CDO issuance had swelled to nearly $68 billion as of Oct. 6, compared to $48 billion a year earlier, according to JPMorgan Securities. CDO issuers are aiming to sell deals that will still be favorable to post-Basel balance sheets while banks are aiming to prune their portfolios of no-longer favorable assets - a phenomenon which is expected to bring fodder for securitization.

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