European CLO spreads have tightened beyond the levels seen late last year into the first quarter of 2005, but Dresdner Klienwort Wasserstein analysts argue that spreads may have reached a plateau and more discrimination between deals is likely to follow.

The market this year has already seen 10 transactions price, which puts volumes at 4.3 billion ($5.3 billion) - a 102% increase over on 2004 half-year volumes when six transactions were launched. Standard & Poor's recently reported that most managers have been working on new transactions that have yet to reach the market. Up to 12 new transactions are expected to come to market over the next few months from established European loan managers, as well as transactions from newcomers to the CLO market (including some new European boutique managers), and established U.S. managers with nascent CLO operations in Europe.

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