Has the turn come to the CPDOs – Part III?

I wrote in earlier entries (Dec 16 and Dec 30 2007) that I keep thinking that we are going to see a large number of downgrades of CPDOs. The instrument that convinced me that the credit party was close to be over is still (not surprisingly) suffering downgrades. Moody’s downgraded a range of CPDOs last week and what surprises me is not that they actually downgrade these highly leveraged instruments en masse but that they didn’t do it earlier. Credit indicies in Europe as well as the US have widened dramatically over the last year (hundreds of %), without any real hope for a return to the previous pathetically low levels, and this might trigger the forced unwinding of these structures. We are not there yet, but I think we’ll soon be there!