The U.S. CDO sector, fueled by residential mortgage and leveraged loan collateral, grew by leaps and bounds in 2006 to an estimated $480 billion - posting a gain of roughly 57% over last year and establishing itself as a staple within fixed income.

And while market participants are not anticipating such a dramatic increase in 2007, they said that innovation and continued investor demand will likely sustain a moderate increase over this year's dollar volume.

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