Over the last three months, CDO liabilities have tightened only moderately.By comparison, corporate spreads have rallied dramatically over the same period.  emphasize that as this disconnect between the CDO, corporate,and ABS markets continues, relative value for CDOs has increased significantly. JPMorgan expects that over the coming weeks and months CDO liabilities will tighten relative to corporates to reflect spreads in the underlying collateral markets. To position for this, the firm recommends increasing exposure to CDOs.

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