As the U.S. CDO sector rounds the corner into the latter half of 2006, market participants are taking time to reflect on some of the trends - from collateral spreads that continue to grind tighter to the increasing use of synthetics - that continue to mold this market. ABS CDO issuance in the first half of the year ballooned to more than $126 billion, almost double the $64.5 billion reached during the same time period last year, according to data maintained by Thomson Financial.

While the U.S. housing market continued to feed the so-called CDO machine - and vice versa - managers began looking to new strategies in order to increase leverage and/or maintain arbitrage. Alternatively, a number of market participants are anticipating more CDO structures to incorporate multiple credit views in order to ensure good positioning through what is a widely expected shift in the currently benign credit cycle.

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