Several factors have led to the significant increase in CDO issuance, including the relatively strong corporate performance and a large supply of loans, along with the increasing size of the investor base and the flexibility provided by synthetic structures. This statement was just made by the Bond Market Association today in conjunction with issuance of its quarterly global collateralized debt obligation (CDO) issuance data.
Global CDO issuance through 3Q06, at $322 billion, has exceeded full year 2005 issuance by 20%. Issuance in 3Q06, at $117.8 billion, also been more than issuance in the third quarter of 2006 by 30%.
"Clearly the CDO market is growing significantly, a tribute to the increased liquidity in the market and innovative structures" said Robbin Conner, vice president and assistant general counsel at the BMA in a company release.
Cash flow and hybrid CDOs, with issuance of $90.1 billion, made up over 75% of issuance in the third quarter, which is the largest sector in terms of structure. Arbitrage CDOs, at $106.9 billion, were the largest deal type in terms of the motivation for the deal.
The BMA's issuance data, which is broken down by both deal type and underlying collateral, is available on its Web site.