Daily Commentary

Yesterday afternoon's weakness has extended overnight into today's session despite global equity strength. Recent heavy supply, a higher Vix and a sobering report from the Congressional Oversight Committee are the driver's of today's move. Recent new issues, especially in the financial space, have weakened from where they came to market.

The Congressional Oversight's report (here) noted, correctly I might add, that the mark-to-market accounting rule changes only temporarily comfort a bank's balance sheet...they do not actually remove the problem assets.

Gadfly Nassim Taleb was on CNBC this morning making a similar case in his oh-so-subtle way:

"We still have a very high level of debt, we still have leadership that's literally incompetent ...They did not see the problem, the don't look at the core of problem. There's an elephant in the room and they did not identify it."

Our brethren in high yield saw an especially heavy issuance yesterday with ~$3.7B in deals coming to market. This is the highest daily amount in 3 months.

There are 2 news items that many are reading as we await the FOMC decision today at ~2:16pm EST. Most importantly is the Obama administration's proposal for derivatives regulation (PR release here, full legal document here). So far, I don't hear the dealers (via ISDA) howling about any particular bullet points.

Today's other summer reading veers towards human interest...or perhaps tragedy. Here is the NYTime's story about Madoff's "aide" DiPascali admitting guilt.