Stronger equity markets and higher risk free rates are keeping credit spreads firmer today.  The majority of credit investors were taciturn, at worst, in their reaction to the GM news.

The recent and rising all-in yield for credit has insurance account buyers eager to participate.  In addition, Moody's dismissed immediate concerns about the AAA rating for the United States.  My favorite pair trade to watch remains the US Government vs Campbell's Soup....CPB has gone back to trading 20bps through (i.e. richer).

The new issue market continues to be a shining beacon for credit.  Goldman is in the market with a $1B 10 year bond (actually a re-opening of an existing deal).  This deal is non FDIC guaranteed;  it's obviously encouraging when those deals are clearing easily without government support.  NSC, TLM and possibly MASSMU are also on the launch pad.

I'm surprised that Chevron spreads (and equity) have not yet reacted to this story about a huge potential liability. 

I'm not surprised that the banks want be on both sides of the PPIP program.  Remember, this is an effort to remove 'toxic' structured product from the banks balance sheets.  I suspect a rash populist political solution will soon be imposed.   

While I generally agree with the precept that the rules for the credit default swap market have successfully weathered many tribulations, I still worry about stories like this.  It shows that there is still room for obstreperous litigation or financial engineering.

The insurance sector has rallied dramatically in the last few days.  There seems to be little new news on the fundamental front and I would, perhaps naively, attribute this strength to 2 recent 'cheap' new issues (ALL and AFLAC).  I would note that Allstate credit spreads are trading very rich versus the equity....CDS is 'predicting' an equity level of ~$36 (vs current ~$26).