Spreads were firm yesterday in the face of the equity selloff.  The credit indices were only slightly wider while a few sectors were actually tighter on the day.  Today, spreads remain firm and equities agree.

Yesterday's equity kerfuffle was about concern that the United States AAA rating may be 'next' to be cut (after the UK).  Both Moody's and S&P came out late in the day and said that the AAA ratings were safe for now.

PIMCO's El Erian was on CNBC this morning.  He believes, as do I, that the short term funding portion of this credit crisis is over (witness LIBOR, TED spread etc.).  He noted that the concern is now what the longer term exit strategy for the government stimulus shall be.

On this very warm holiday shortened day, Geithner has managed to send shivers down many Wall Street spines as he said "we're going to see very very substantial change" in the way compensation is paid.  

MET's CEO noted that his balance sheet is "very strong."   This was met with a 'hunh?' reaction in credit spreads as they are unchanged on the day in line with the rest of the insurance sector.

As I noted, Asian demand remains strong for high quality paper.  This is likely to have driven the issuance of ~$2B yesterday from highly rated Hewlett Packard.  Secondary volumes were above average and 'dealer sell' vs 'dealer buy' ratio remains high.    

To end the week on some (cherrypicked) positive notes....the credit curve normalized by another 2 basis points this week and BBB rated bonds again outperformed single A rated bonds.