Credit spreads have had a pretty volatile day so far starting out weaker but since recovering to slightly better. I had expected a straightforward stronger opening this morning given the Chinese stimulus package and resultant equity reaction. I suspect yesterday's down day on the Vix will not be repeated.
The new issue market was dormant only briefly. Yesterday we saw over $11B in issuance from names such as KO, LLY and Cargill. All are slightly better than where they were issued. There were 2 small utility deals issued in the market this morning.
GE spreads have been getting killed of late. The CDS for GE are now trading 'points up front' which is typical only of very distressed names. If you'd like a primer/explanation of 'points up front' please leave a comment on the site. The NYTimes nicely summarized some of the prevalent worries in the name....largely unrecognized losses.
This month's Atlantic Magazine has an interesting article about how the crisis is impacting different areas of the country. I was surprised to hear that NYC's financial jobs only make up only 8% of the overall job base....vs Des Moines at 18%, Hartford at 13% and Charlotte NC at 10%. The national average is ~5.5%.
In a move reminiscent of days gone by, DeutscheBank just hired away 2 traders from BankAmerica. This is notable for 2 reasons; one, the trend over the last 12-18 months had been to leave big principal trading firms for smaller agency only shops. Also, these 2 guys (Sean George and Masaya Okoshi) were successful originally on the cash bond side of trading (not CDS). Perhaps the days of the 25 year old quant jocks getting paid 2-3 sticks a year to trade CDS are over.
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