Credit Index tightening and CPDOs

simonsays · Post by **simonsays** » Sat Jan 27, 2007 7:48 pm

Thanks for the references.

While it would be nice to have something beyond economic storytelling, perhaps that will have to work for now (Money of the Mind). Agency and conflict of interest seem to be playing their role. I wonder of the structurers of CPDOs will get some TV time at a congressional hearing.

Related to the issue of liquidity, I like this paper.

Cheng · Post by **Cheng** » Wed Apr 11, 2007 9:34 am

There is a special report from Moodys called "CPDOs: A Primer" floating around on their homepage. Unfortunately I cannot access it, could anyone mail me a copy ?

baghead · Post by **baghead** » Wed Apr 11, 2007 10:41 am

on your email.

Cheng · Post by **Cheng** » Wed Apr 11, 2007 11:18 am

Thanks baghead.

baghead · Post by **baghead** » Wed Apr 11, 2007 11:34 am

no worries. let me know if you have cares in a managed one.

Cheng · Post by **Cheng** » Wed Apr 11, 2007 1:56 pm

Will do. I am currently looking at a managed one, but the fee structure reminds me of highway robbery Wink .

baghead · Post by **baghead** » Wed Apr 11, 2007 2:12 pm

I'll make you an offer you can't refuse......

[img]http://tbn0.google.com/images?q=tbn:BvvUl-ap90_AiM:http://alpacino_fan.tripod.com/sitebuildercontent/sitebuilderpictures/devil.jpg[/img]

Cheng · Post by **Cheng** » Wed Apr 11, 2007 3:04 pm

Dood, I know your number plate and once in a while I have enough time for a little entertainment.

[img]/User%20Files/464/BurningCar.JPG[/img]

baghead · Post by **baghead** » Wed Apr 11, 2007 3:08 pm

I apologise for Cheng to all Algerian/Northern African phorum members for this inappropiate post

Skillionaire · Post by **Skillionaire** » Thu Apr 26, 2007 8:31 pm

[i]I cannot say much about the rating but anything that pays 200 bps in the current environment cannot be AAA.[/i]

Fitch and DBRS seem to agree with you (from creditsights.com, published 4-25-07):

Last week two of the Nationally Recognized Statistical Rating Organizations (NRSROs) released commentary on Constant Proportion Debt Obligations (CPDOs). Fitch Ratings and DBRS both indicated that the first generation of instruments warrant ratings closer to single-A rather than the triple-As assigned by S&P and Moody's.

The recent comments given by these players echo very closely the positions we have previously laid out for the analysis of CPDOs and hence not surprisingly we agree with much of it. Our initial assessments reflected our view that CPDOs are far too reliant on a particular ratings methodology to be the high quality products they are purported to be. [b]In short, we felt that the major weaknesses of the vehicles were the possibility of a lacking rolldown effect, the possibility of a late cycle widening, the possibility of fallen angels without spread recapture (i.e. idiosynchratic risk), the possibility of a prolonged low spread environment, and a detrimental reliance on the index and its odd name selection[/b]..[b]..[i].....[/i]changing the assumptions even to a set of very benign spread environments causes the percentage of successful runs to fall to a level we feel is more commensurate with BBB to BB ratings.[/b]

*I apologize in advance for any typos - cutting and pasting from this site is impossible.

[b][/b]