Morgan Stanley research shows 81% YTD increase in global CDO issuance

Analysts at Morgan Stanley published a ‘CDO Market Update’ today in which they identify an 81% increase in global CDO issuance for the year to date over the issuance during the first five months of 2006. Total issuance so far this year is said to be $254.8 billion.

According to the research the most notable change is in structured finance CDO issuance. While mezzanine ABS CDO issuance continues to fall, there is a significant pick-up in high grade ABS CDOs as well as CDOs squared. High grade deal sizes of both these types of transactions are significantly larger in transactions that priced in May relative to their average deal sizes.

Morgan Stanley’s research shows that global CDO issuance picked up in May relative to April’s significant volumes decline. It is estimated that deals totalling £51.4 billion from 81 transactions priced last month. However, new issuance in global CLOs declined in May ($12.7 billion) relative to April ($16.8 billion) due to widening of liability spreads - although it is noted that one large transaction accounted for $3.5 billion of April’s total.

Source: Vishwanath Tirupattur, Morgan Stanley