After an extended trip with some pretty heavy baggage, 2003 marked the return of a strong collateralized debt obligation market. A number of positive influences bolstered CDO performance for the year, analysts reported. Record primary and secondary volumes were seen, and spread tightening was accompanied by overall improvement in the corporate credit environment.

With final tallies signed, sealed and delivered, the CDO market posted tremendous year-over-year growth. By one account, $600 billion notional was issued globally via CDOs, a significant 123% rise over the $269 billion issued in 2002. According to Banc of America Securities, 505 visible CDOs were issued last year. The majority of that growth occurred in synthetic CDOs, where notional volume surged 155%. Also, global cash CDO issuance reached $68.4 billion, a 13% increase year-over-year.

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