Dominion Bond Rating Service is expecting Canadian conduits to become an increasingly larger player in the CDO market. The rating agency is projecting conduit CDO purchases to grow to 15% to 20% of conduit outstandings next year, up from a currently estimated 7% to 8% share. But, that growth will depend, in part, on conduit and ABCP investor support of the products, which Dominion is trying to drum up.
Dominion analysts traveled to Toronto and Montreal last week to try and alleviate conduit and ABCP investor concern regarding CDO investment. CDOs in the markets wear the stigma of the poorly performing 2001 and 2002 vintages, according to Dominion, but the acceptance of CDO and derivative investment is a concern of the Canadian rating agency.