CDO market is still frozen

The credit crunch continues; the CDO market is still stuck in the mud.

Feb. 5 (Bloomberg) -- Buying and selling of collateralized debt obligations based on mortgage bonds, high-yield loans or preferred shares has ground to a near-halt, traders said at the securitization industry's largest conference.

The slowdown of the more than $2 trillion CDO market follows record downgrades in mortgage-linked securities last year. Some AAA rated debt lost all its value. CDOs, which have fueled unprecedented bank writedowns since mid-2007, repackage assets into new securities with varying risks.

Lighter trading volumes for asset-backed bonds and larger- than-typical differences between the prices at which they can be bought and sold have made valuing holdings difficult and dissuaded investors from purchasing the debt, said Sanjeev Handa, head of global public markets at TIAA-CREF.

Demand for new CDOs has stalled, with just one created in the U.S. so far this year, according to JPMorgan. The creation of CDOs dipped about 10 percent last year to $494.7 billion, according to the company. The figures include only issuance for which investor money was collected upfront.