The CDO market continued to grow at a furious pace in the first half of 2001, but in the foreground of the two to three CDOs that priced each week on average, a barage of rating agency credit watches and downgrades kept a sober mood around the product.

Prior to the first quarter, an investor could take comfort that a triple-A CDO tranche had never been downgraded. Now we can say six triple-A rated CDO tranches have been knocked down to double-A. And most recently, Delaware Investment Advisors saw Standard & Poor's whack their rating on CHYPS 1997-1 CBO to single-A from triple-A - an unfortunate first for the marketplace.

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