The Bond Market Association's collateralized debt obligation committee is working to establish standards on how to treat money market classes for league-table purposes. "We are hopeful of taking a position and setting some standards," says Janice Warne, co-head of the CDO origination group at Citigroup Global Markets and one of three chairs of the CDO committee. Sales of short-term classes with maturities of one year and in are becoming common in CDOs backed by structured finance assets, as structurers use high-quality assets to ramp up the deals. By selling money market tranches, they can reduce funding costs and place bonds with a new class of buyers, according to analysts.
Warne says the committee is considering recommendations but declined to be more specific. Jon Teall, a spokesman for the trade group, says the committee is working with third-party data provider Thomson Financial to create several CDO league tables, instead of just one amorphous leader board.
The initiative comes as some bankers say they worry these sales could skew league table results, since short-term classes tend to be of large principal amounts. Money market bonds are generally perceived as being easier to sell than longer bonds, because they carry less credit risk and money market CDOs offer a significant yield pick-up to other cash-like instruments. "League tables are important but they are not always an accurate reflection," says one originator. He adds that he believes firms should get credit for what they sell, regardless of how large it is.