Loan Market at Center of Meltdown Is Making a Comeback

Here's a sign that the financial markets are truly beginning to recover. The market for pools of loans known as collateralized loan obligations is showing early signs of getting back on its feet. Citigroup—yes, Citigroup, the bailed-out bank that still counts the U.S. as its largest shareholder—is about to underwrite the market's first CLO in a year, according to a report from Bloomberg, which cited unnamed sources familiar with the deal.

Citigroup will underwrite a $500 million CLO managed by WCAS Fraser Sullivan Investment Management. Prices for CLOs in the secondary market have rallied to 90.5 cents on the dollar from a record low of 69 cents in April, Bloomberg said, citing Morgan Stanley data. New CLO issues by Bank of America and JPMorgan Chase also are in the works.

In a sign that not so much has changed on Wall Street, Citi is also said to be boosting its proprietary trading unit. Proprietary trading, in which banks trade for their own account, is likely to be banned for deposit-taking banks by the Obama administration and Congress. The new rules haven't been made final, though.

For all the talk of how new rules are reshaping the financial markets, the real future of the markets is unfolding in the markets themselves. And the future may look a lot more like the past than many people would care to admit.