As if the Bear Stearns liquidation were not enough to ruffle the ABS CDO market, industry participants expect similar meltdowns to occur within the next few weeks. And as difficulties increase in placing portions of ABS CDO issues across the credit spectrum, further market drama will only weaken the demand.

A recent research report from JPMorgan Securities noted that given the liquidation of some high-grade structured finance CDO positions at wider spreads, dealer warehouse appetite has dramatically shrunk. And the recent warehousing liquidations would further slow, if not halt entirely, the already stagnant new issue market.

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