As more of these stress test results are allegedly leaked, credit investors are clearly starting to view this as an equity story, not a debt one; witness, bank spreads are largely unchanged today.
Demand for credit remains quite robust. Today alone, we are seeing new issues from Goldman (non FDIC), Diamond Offshore, Encana and Florida Gas. Goldman's decision not to use an FDIC guarantee will add an additional ~3.75% to their annual borrowing costs.
While there is a FOMC announcement today, most are not focused on it. Fed Fund futures have shown little volatility in last several weeks with a gradual move from ~20bps (implied) to the current ~15bps. Obviously, with rates so low already, eyes are 'quantitative easing' measures at this point.
It is important to remember that TED spreads have remained below pre-Lehman levels for several months now:
One should also note that UK short term rates have fallen for 44 consecutive days.
I thought this article in the New Yorker was quite interesting. It discusses the historical success rates of companies that actually increased spending (R&D, advertising, M&A) during recessions versus those that did not.
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