The recent (10/22/99) submission of the Bond Market Association's (BMA) proposal to the Department of Labor to make certain subordinated MBS/ABS/CMBS classes ERISA-eligible could give a much-needed boost to these subordinated sectors. If the BMA's proposals are implemented, a major new source of demand would be created for these securities, while simultaneously providing pension funds with a new array of high yielding investment products. New progress, yes. But this is not a new topic.

The BMA has discussed the issue with the Department of Labor (DOL) for several years. A draft proposal was submitted by the BMA in April of this year. Their final proposal contained changes suggested by DOL. Because BMA's proposal incorporates issues already raised by the DOL, it may increase the likelihood that some portions will be adopted. This is especially true for AAA through A subordinated securities. (Yes, it IS possible to have subordinated AAA se-curities! It is also possible to have AA or A seniors.) It is less clear as to whether the DOL will allow BBB securities.

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