Daily Commentary

Credit spreads continue their march tighter with other more moribund summer markets. While it's only 1 day of widening, I have noted that I fear the negative basis has run too far too fast and may give some of that narrowing back.

Secondary volumes remain above average with a smattering of new issues, lead by Dell, in the queue this morning. I suspect 'queue' is quite a popular verb this morning in London given the Tube strike.

JPMorgan research notes the mortgage spreads have rallied ~60% (from their wide spreads) with almost 1/3 of the entire market now held by the US government. This makes credit spreads look quite attractive as they've 'only' rallied ~50% but have zero direct government holders.

This blog has a hearty defense of the mortgage (and other) securitization machine from an insider.

Here's an interesting indicator for the health of the economy...and apparently it's one that former FOMC Chairman Greenspan watches as well.....underwear sales. Apparently, we've bottomed (pun intended).

Looking at market wide credit default swap data (from the DTCC), I noted some surprising facts.....BRK amd PMI have ~7x in net CDS outstanding compared to their public debt outstanding. MBI, RDN, MTG and ABK are all in the 3-4x range. Outside of those insurance names, RSH was the next highest (notable) at ~3x.