Spreads in the credit markets are stronger today largely driven by continued demand and little new issuance to soak that up. In addition, the good bank/bad bank rhetoric from the White House has encouraged market participants. The Vix has been lower for 5 of the last 6 days and that certainly soothes credit investors.
I think the muted reaction to today's Fed is largely due to the perception that monetary policy has just about run out of bullets.
Name as many AAA rated issuers as you can? I bet you started with GE....Moody's put them on watch negative yesterday (S&P already did). 'Watch negative' implies an imminent downgrade. BRK, JNJ, NYLife, TIAA and Toyota Motor Credit are the others that remain AAA (PFE is AAA at S&P only).
One other interesting spread relationship....Campbell's Soup credit is perceived in the market as safer than US Gov't debt.
DTCC released its CDS outstanding report....net outstanding has fallen 6% in the last month. This is largely due to (the few remaining) dealers collapsing offsetting positions. But yes, that does mean less risk in the system.
The Financial Times today has an interesting article here about the conundrum facing governments. Where in the capital structure (of a bank) do you drawn the line (of support)? Equity? Nah, let them suffer. Senior debt? No way, it's a nationalized company now. The grey area is hybrid/preferred space in between.
The number of people taking the CFA Level I exam in December jumped 25%. The pass rate dropped dramatically to 35%. Only 20% of the people that start the process pass all 3 levels.
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