4 ms·
IIRC the issue leading up to 2008 was because demand for CDOs grew to such a level that underwriters were struggling to honestly supply enough debt in the upper
by longerthoughts 8y ago
IIRC the issue leading up to 2008 was because demand for CDOs grew to such a level that underwriters were struggling to honestly supply enough debt in the upper tranches (i.e. low risk), which introduced market pressure for agencies to overrate risky assets to pad out new CDOs. Makes me wonder, how does the current market size for CLOs compare to CDOs in 2008? Does the same pressure apply here or is the supply of highly rated assets sufficient to meet market demand?