Several dealers commented that they are taking the growth prospect of municipal bond-backed CBOs seriously, although resource allocation to the product has been mixed.

A major driver for the muni CBOs is going to be the massive amounts of unrated muni-debt which investors want to move off balance sheet and gaining an arbitrage is encouraging, since these bonds have considerable spread, said Chris Moriarty, a director at Standard & Poor's.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.