The obvious question in finance has been, where in the capital structure will the government draw the line? Hybrids and preferreds have had a whipsaw year as they are clearly the current Maginot line. Bloomberg had an article today where Dan Fuss uttered that preferreds are "screaming buys."
Given the bond investors are largely pessimists, I found it a bit odd that GE spreads are actually slightly better this morning (so far) despite losing their AAA rating from S&P which they've held since 1956. The perverse logic here is that S&P put them on stable outlook whereas when they also cut HSBC Finance (old Household) earlier this month to A, they put them on negative outlook and spreads have gotten whacked.
I'm disappointed to see that the negative basis is widening and that secondary volumes have been relatively light. These tell me that any rally won't have legs. If the negative basis is widening, cash bonds are lagging any rally in CDS spreads. If it's just CDS spreads, that tells me that only fast money is buying. Also, while I am encouraged that new issues are coming to market and getting placed, if secondary bonds are still thinly traded, that tells me it's not a broad buying base.
Speaking of new issues, GS, VLO and SYY are in the market today. MRK and PFE are looming over the near term horizon. They continue to be placed easily and perform in the aftermarket.
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