The CDO market has apparently become disenchanted with high-yield bonds, as more and more CDO managers are turning away from junk in favor of less-volatile collateral like asset-backed securities.

In first-quarter 2002, ABS and commercial mortgage-backed securities contributed more volume to new CDOs than junk bonds, which is the first time in market history that has happened, researchers from Deutsche Bank Securities said. Further, only one new entirely high-yield CDO has been issued so far this year-a far cry from the junk CDO market's heyday. For example, 15 new junk CDOs were issued in the first four months of 1999 alone.

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