Mention high yield to someone in the CDO market, and you'll likely elicit a negative reaction. After all, high yield has been the least favorite asset class for CDO collateral over the past couple of years, as a result of the record defaults and rating downgrades the sector has experienced.

But that might be about to change, according to Sivan Mahadevan, head of credit derivatives and structured credit research at Morgan Stanley, who spoke at the Bond Market Association's first annual CDO conference in New York last week.

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