A lack of new issue supply early in the week should keep a cap on further widening in the United States. Europe is seeing supply in the bank space this morning.
That being said, the geopolitical scene (Iranian elections, Netanyahu, and North Korea come to mind) could cause further agita for the markets.
The technical demand picture still looks strong as inflows continue into high grade bond funds largely at the expense of money market funds. However, the dealer sell vs buy ratio has crept down a bit....a trend to be watched.
JPMorgan notes that in this downturn, corporate profits have 'only' fallen 13.4% versus the drop of 28.9% in the 2001 recession. This is thanks to heavy cost and job cutting. In addition, the pace of stock buybacks is down ~60% versus last year.
I'm heartened by the interest in securities down in the capital structure which further fortifies the view that risk appetite is back.
Call him irrelevant, hypocritical or pandering to populism....George Soros is calling for credit default swaps to be outlawed.
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