Up until now, synthetic CDO technology has been predominately applied to corporate assets. With market fundamentals shifting, arrangers will more aggressively explore opportunities to apply this technology to structured finance assets, analysts said.
According to figures released by Standard & Poor's earlier this year, 93% of all CDO transactions rated in 2003 were synthetic, marking an 83% increase over 2002 volumes. About 64% of this activity was represented by single-tranche or correlation trades using multi-issuing vehicles and MTN programs to issue notes. This single-tranche platform has been primarily applied to investment-grade corporate assets.