Spreads on structured finance CDOs tightened another two basis points last week, to 30 basis points on triple-A rated notes, landing at historically tight levels - 10 basis points tighter than six months ago, and 20 basis points tighter from a year ago according to Morgan Stanley. Strong investor demand continues to fuel the tight spreads, despite the argument by some that investors are not getting compensated for the risk in the underlying collateral.

Louis Lucido, a managing director at TCW Group who helps oversee $10.9 billion in structured finance assets, said he's seeing increased interest from "nontraditional buyers," and that opportunities in the market still exist for the prudently minded investor.

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