Daily commentary

We can thank Vik and Ben for a strong opening this morning as spreads are following equities.

Vikram Pandit followed GE's lead of a few days ago and extolled Citi's strong (recent) profits and prospects with welcome granularity.

Fed Chair Bernanke's talk and Q&A was well received as well. I found his discussion on fair value illuminating. While not calling for mark-to-market rules to be eliminated, if softened one can expect an enormous rally.

I'm greatly encouraged by 2 things this morning....one, a big drop in the Vix. Two, the new issue market is alive and well.

Yesterday saw ~$17B in FDIC guaranteed debt and ~$2B non guaranteed debt issued. Today alone we're seeing deals from BA, HAL, CVS and South Carolina Elec and Gas.

A few days ago, I noted the irony of S&P calling for rating agency reform. Today's claim from Moody's that they are "getting ahead" of bankruptcy by coming out with a "Bottom Rung" list of troubled credits is amusing. This isn't getting ahead of anything...but rather potentially causing bankruptcy.

Some minor notes....credit curves have steepened by ~4bps over the last month...this is a good thing. Also, the major credit index (CDX) has it's semi-annual roll on the 20th of this month. The new index (#12) will be ~44bps tighter than the old one (#11).

JPMorgan's excellent cross asset class research shows CNA stock as undervalued....the CDS shows the equity should be valued closer to $14 (vs it's current ~$6)....strong Z score and high R squared as you'd expect.