The third quarter report card for U.S. CDOs released last week by Standard & Poor's, showed some expected strengths - located in the high-yield corporate bond and loan sectors - as well as the usual weaknesses, such as later vintage MH ABS-backed securities. And judging by the make-up of deals currently on either negative or positive review by the rating agency, this quarter's trends are likely to continue into yearend.

S&P upgraded 22 CDO classes and downgraded 18 in the third quarter. The number of upgrades, all but three of which were on cashflow CDOs, declined by a little more than a third from the previous quarter's 36 upgrades. The rating agency's ratio of CDO upgrades to downgrades for the quarter was 1.22 - making it only the third time in which the upgrade-to-downgrade ratio was greater than one, yet still lower than the second quarter's 2.11 ratio.

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