I'm a bit flummoxed how equities can be weaker, swap spreads wider, the Vix is higher....and yet spreads are tighter. If forced to cite a possible reason for today's strength, I'd choose the Bank of England's expanded quantitative easing and a massive short covering rally in AIG risk (all forms).
AIG bonds are up ~$5 on the tenuous (my term) link between it's business and Radian's recent strong earnings. "Analysts weren't sure" was the WSJ's response.
Here's the local take on the increased and expanded intervention on behalf of the Bank of England into their government bond market.
Everything Jeremy Grantham writes is a must-read for me...here's his latest about the conundrum of what to do when you're at fair value.
Regulatory inquiries into credit default business practices are popping up as frequently as lice outbreaks at summer camp. Today's recipient was Goldman Sachs...they of 46 separate trading days of $100mm profit each. WSJ coverage here.
Demand for new issues continues...unimpeded even by the summer doldrums. When 2 REIT deals (from SPG and DRE) clear smoothly, that's a robust market...as REIT's have long been the least liquid sector in the corporate bond market.
Cash bonds continue to outperform (their own) CDS as seen here in this graph from JPMorgan. You'll note that this negative basis has 'recovered' to pre-crisis levels.
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