Despite the prospect of a further weakening economy and the revaluation of all fixed-income products, new-issue CDOs have so far remained relatively unscathed, indicating the product is less affected than comparably rated corporates. Triple-As have widened two to five basis points (L+43-46) on upper tier deals, and ABS CDOs are pricing in the Libor plus 47.5 to 50 basis points range. Minimum senior debt widening reflects continued conduit demand, but lower tranches have not been as insulated thus far.
Currently, the CDO-of-CDO bid is not as strong as in the past, with very few of these deals visibly in ramp up mode, according to one dealer. "There's only a handful of CDO-of-CDO shops out there and they want bargains," added the source. Triple-B bonds have gapped-out approximately 50 basis points (L+220-280), and double-Bs (L+650-725) even further, according to UBS Warburg.