CLOs continued to squeak out new issuance in the second quarter, making them the only corner of the U.S. CDO market to do so. The good news is that, of the new CLO deals to hit the market, several were structured from fresh loan assets - rather than from balance sheet assets, which have thus far represented most 2008 CLO issuance.

"Where spreads are right now, it does not make it conducive to issuing a CLO, at least for arbitrage purposes," said James Grady, managing director and senior portfolio manager for structured finance securities at Deutsche Insurance Asset Management. He noted that the majority of CLOs that got done in the first half of the year were typically structured to clear off dealers' books. "It was more of a situation to lighten up dealers' inventories at a cost," Grady said.

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