New issues in the domestic CDO marketplace have declined sharply in recent weeks, prompting speculation that more than just downgrades are clouding the sector's vigor and clogging up the pipeline.

While April saw a total of $6.38 billion in funded new issuance, last month that figure had dropped to $2.42 billion as of May 22, according to JPMorgan data. Moody's Investor's Service stated that CDO issuance "nose-dived" by 30% in the first quarter, compared to the same period in 2002. Rated volume in 1Q03 totaled just $6.0 billion, less than half of the $13.7 billion rated one year earlier. Moody's Jeremy Gluck, managing director at Moody's, predicts the annual U.S. volume will fall short of the pace set in 2002.

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