The volume of CDO bonds currently being marketed on the European front was pushed up to E1.3 billion last week with the issuance of Rhea 1 - a static pool CDO originated by Bank Gesellschaft Berlin.

Also joining the CDO wave were AXA Investment Managers' second synthetic cash flow CDO, a $1.25 billion deal called Khaleej I. According to market sources, both rated tranches paid a substantial premium when compared to AXA's Jazz CDO. The triple-A tranche priced at 65 basis points over Libor, and the single-A minus tranche priced at 190 basis points over. The Jazz CDO priced earlier this year at 47 basis points over Libor for the triple-A tranche and 135 over for its single-A piece. "The deals aren't completely similar, but the pricing difference does not reflect the fact that they are not alike - it just depicts the spread widening that the market has experienced since February," said one market source.

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