Europe’s high-yield debt market is on its knees. Investors have had two years of heavy losses and new issuance has ground to a halt. But bankers predict rapid growth in a related area: the issuance of high-yield CDOs (collateralized debt obligations).
The supply of CDOs in Europe is booming. But the market is dominated by investment-grade credit deals, with the majority in synthetic rather than cash form (see page 72). Only 5% of European CDOs relate to high-yield assets, compared with 80% in the US.
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