While collateralized debt obligations in Europe have been predominately balance-sheet deals, arbitrage deals are on the rise, promising to eclipse all of 2000's cashflow-deal issuance by mid-year, sources said.

Currently there are at least five European asset arbitrage deals circling the U.K. market, investors said. This is compared to just seven high-yield CBOs out of Europe last year, and one deal in 1999.

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