Predictably, spreads are headed wider following the equity markets concern over swine flu.

Other drivers this week will be continued earnings announcements, the Fed release on Tuesday, and a few pending auto headlines (Chrysler/Fiat and GM debt restructuring and a alleged UAW agreement).  So keep your eyes on the tape and for the moment, don't worry about the usual drivers of the Vix and swap spreads.  I suspect new issue supply will be muted considering all the potential "tape bombs" that could screw up a new issue.     

The Fed has released a study that shows the ideal current interest rate is -5%.  Details on how they'll achieve a negative interest rate were not released.

As I've mentioned a few times previously, the risk appetite is back.  Witness Goldman's VAR figure jumping over 20% for Q1.  Their absolute number is double the next broker/dealer.

How many times in the last 2 years did you hear "don't worry about AIG, they can always sell their crown jewel ILFC"?  Well, things do not look so rosy for the prospect of that sale.  Bids are coming in ~65% of book value.

Despite a rally in spreads, implied default rates are still well above historical norms.  Recent DeutscheBank data shows that current market spreads are implying that ~36% of investment grade bonds will default.  Compare this implied rate the worst ever actual rate of 2.4% and you can see the case for owning corporate bonds (if you can hold them long term).