Daily Commentary

We expected that all eyes would be on the payrolls number for guidance and they were. A weak number has equities and credit spreads softer. Remember, it's an early close for the bond market so most investors watch the number, leave a few orders with the desk and head out for the weekend.

In fundamental news today we saw Lear file Chapter 11. For a quick capital structure snapshot of levels, bonds have been trading ~$35 and loans ~$75.

Johnson and Johnson, one of the few remaining AAA rated industrials, just took a $1B stake in Elan. Despite this outlay, JNJ bond spreads remain very tight, largely unchanged and very active.

In yet another data point supporting the trend of equity raising (versus levering up), Rio is raising $15B in rights (story here).

The ECB left rates unchanged. This did not surprise many as most folks acknowledge that it will largely be a quantitative easing story going forward. Trichet is just now beginning his Q&A (see NI ECB on Bloomberg for the headlines) which may have some further detail on debt purchases.

Bill Gross was just on CNBC (post payroll #) stating, amongst other things, that "the government must provide new forms of stimulus."

The latest salvo in Krugman's "It's Reagan's Fault" debate is coming from the National Review in their response "Blame Not the Deregulator."

The most current CDX index (#12) is currently ~17bps rich to intrinsic. As a percentage of spread, this is a pretty high outlier and one should expect that to collapse fairly quickly. This was largely caused by month/quarter end technicals.

Take a look at this article written in January by Bloomberg News about the LIBOR-OIS spread. In it, Alan Greenspan notes that "normal" conditions will prevail when it gets to ~25bps. At the time, the spread has just broke 100bps. Well, it's now ~38bps and going down.

This is a good short weekend read, heavy on human interest, light on insight, about the guy that is unwinding all of AIGFP's swaps.