What's junk to foreigners might be gold to natives. For three years Colombian bankers have plucked high-yield, cross-border bonds from the dollar market and used them to back high-rated local deals, denominated in both pesos and greenbacks. Most of these transactions seek to capitalize on arbitrage opportunities between foreign and local rates and currencies. Another plus for structurers is the smoldering demand from pension funds barred from directly buying overseas paper.

But the catalyst can be something else altogether. The most recent of these CDOs was engineered for Credit Suisse First Boston to balance out risk between the Colombian peso and the dollar, according to sources. "They were looking for a counterparty for a swap operation," said a source on the transaction. And unlike other deals in the sector, the underlying notes are investment-grade.

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