There is mounting interest in Asia and the rest of the financial world for collateralized debt obligations backed by commodities. Collateralized commodities obligations combine the payoffs and structural features of a synthetic collateralized debt obligation, effectively transforming commodities into a credit structure that can be rated.
Rachel Hardee, head of Asia-pacific structured credit at Derivative Fitch in Hong Kong, said the agency has registered high levels of interest in the structures, saying "[Commodity CDOs] have been done before, but are re-emerging in popularity." The structures can be used to diversify a portfolio because they are not linked to corporate credit or asset-backed securities. She also added that the structures were appealing to a broad variety of investors and that there had not yet been enough deals in this cycle of interest to say what effect the take up of commodity collateralized debt obligations might have on other synthetic securities.
