Daily Commentary

Oddly, spreads are a bit wider in light volume.  Given the backdrop of mixed European equities, a mild Vix, a strong new issue market and tighter US swap spreads, I would have thought the credit markets would shrug off a weaker US equity market.

Yesterday, Bernanke mentioned the word 'credit' 29 times yesterday in his speech at Morehouse College.  Perhaps he was acknowledging the well known predictive capacity of credit spreads for future economic activity; this was most recently discussed in academia here.  

MetLife has said it has adequate cash on hand and will not accept TARP funds.  Spreads were mildly tighter on this news.

While largely look-back (in impact), S&P has raised it's estimated European default rate for 2010 to 29% (E'09 11%).

Demand for credit, particularly new issues, continues unabated.  Witness today's announcement of a new issue for Rio Tinto at 8:40am.  By 9:45am, the deal was 'closed' with close to $10B in demand.  

I see 2 positive signs for risky assets.  One, hedge fund redemptions have slowed.  Two, the carry trade (in forex) is back which historically been a large driver of hedge fund returns.  Like 'em or hate 'em, hedge funds are the primary buyers/holders/traders of risky assets.  When they're healthy, risky assets have the tendency to outperform.

Quick...what's the largest bank in the world (by market value and deposits)?  No cheating...   (answer : here)