While the banks have raised $85B in capital to re-pay their TARP funds, including $7B yesterday, the Fed seems to be taking a 'not so fast' approach to repayment; witness this article that they pay back more than originally asked in the stress tests of a month ago.
While there is still a macro imbalance between the natural ongoing demand for corporate bonds and the supply, the last few days has seen more selling pressure. I've heard of several traditional and non-traditional (i.e. equity funds) selling in the market. The TRACE data somewhat bears that out as the recent trend in the ratio of dealer sells vs dealer buys has shrunk from the 3x range to closer to 2x.
Now, that being said, the negative basis continues to shrink which is a positive sign of demand. This data can be occasionally backwards looking as bond prices, and pricing services, can sometimes lag CDS pricing.
Several news sources and blog have noted that spreads in both investment grade and high yield are approaching their pre-Lehman blow up levels. I suspect that the very mention of this (historically wide) level may cause some pause in our spread rally.
The new issue market was tepid yesterday with ~$3B in issuance. I'm hearing that ACE and VOD are in the market today with deals.
There is quite a squeeze in the US Treasury 10yr market. Be aware that that yield may be artificially rich/low until this matter passes.
A Bloomberg news columnist notes here that bondholders may not be as safe as traditionally thought during this administration.
Perhaps we can replenish the government's coffers by taxing fat people.
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