Daily commentary

The credit markets are opening up slightly better so far this morning with the Barclays Credit index at +454bps OAS.  Swap spreads are slightly tighter which should buoy the finance names (see earlier post for why this matters).  Bear in mind that if you watch the CDX index, it's currently near it's all time 'rich' (vs intrinsic) valuation...by ~40bps on a base of 206bps.    

Citi brought an enormous $12B FDIC backed deal successfully on Friday.  That's OK news....not great as it would not have come to market and cleared as smoothly without that FDIC backing.  In other "OK news", high yield issuance last week was $1.8B which was the highest amount since last July.  Investment grade issuance this week should be quiet as it typically is during quiet periods of earnings season.  I'll be surprised if the recent demand (for new issues) shifts to secondary bonds. 

When watching issuance volume, be sure to focus on non-FDIC volume as that is a better proxy for credit health/growth (currently $38.9B MTD vs $35.6 MTD of FDIC issuance).   

In credit spreads, WYE was only slightly wider (~3bps) vs PFE which was ~20bps wider to the merger news.

Despite $148B in taxpayer capital, bank lending was actually down 1.3% between Q3 and Q4.  

JPM data shows the current outliers (where credit and equity diverge) as NCX (lower), URI (much higher), PEP (higher) and NYT (higher).  When I say "higher" that means that the CDS spreads are implying higher equity prices.