As deleveraging in the loan market drags on, there are signs that market discipline is being tested to the limit. Optimism that the new year would herald a recovery has been dashed as triggers have tripped on total return swaps (TRS) and market value CLO structures and they have been forced into portfolio unwinds. Some $85 billion-worth of TRS trades were done in just two years before the credit crisis, and this means that there is an awful lot of paper to be dumped back into an already depressed secondary market.
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