Daily Commentary

The credit markets are only slightly weaker this morning having recovered a bit in the last few hours.  We remain in lock stop with equities for now.

Once again, new issue supply remains at the forefront of most credit investor decision.  Yesterday saw ~$9.5B in new debt from issuers AXP, WYN, MTNA, JPM (non gtd) and STANLN (Standard Charter).  So far today, it seems quiet.

Yesterday we heard an ECB member state that they may buy corporate bonds.  Hours later, another ECB member (Weber) said that he 'didn't see the need.'  Clear as mud.

The clamor for regulation of the CDS market is unsurprisingly increasing.  Yesterday, it was Geithner making his case.  Bloomberg had an insightful article about how the popularity of negative basis trades is making it increasingly difficult for issuers to renegotiate debt terms (in the traditional way).  Debtholders are no longer primarily concerned with being paid back as they may also benefit more from a default (due to their corresponding and offsetting CDS positions).  It's a good read.    

Some believe AIG's crown jewel was International Lease Finance.  Personally, I think's it's the Stowe Mountain Resort....which is now officially on the block.

I'm becoming a bit concerned by the ratio of 'dealer sells' to 'dealer buys' (from TRACE data) over the last few days; it has been consistently in the ~3x neighborhood.  That leads me to believe that buyers could be getting full and we could have a pullback.    

MBIA is being sued for the Nth time.  This time it's the banks.  The MBIA 14s (bonds issued from the insurance company) are now trading in the mid ~$30s.  They are Caa2 rated by Moody's (rated Aa2 at new issue).