Daily Commentary

Yesterday's move wider may have been exaggerated by thin attendance; thus today's move tighter may be simply a snap back. Mixed equity performance, mixed swap spreads and a meandering Vix are not sending any particularly strong signals this morning.

The biggest story I've seen this morning has not impacted spreads but should be a matter of concern for the financials. The FASB is debating expanding mark-to-market accounting standards to more assets classes (think loans). As I've noted repeatedly, this could have a huge negative impact on the banks.

I am encouraged by a couple of data points and stories. One, the negative basis continues to narrow showing the resiliency of corporate bonds (over CDS). Two, overall market volumes actually remain pretty healthy (yes, in contrast to my 'thin' comment earlier) and breadth is expanding (up ~15% from longer term averages). Also, a few newswires are picking up the recent Fitch survey showing most European investors believe the worst of the credit crisis has past.

While it's not directly credit related, I am buoyed by the Fed's announcement that their treasury purchases (read manipulation) are being phased out. This is in direct contrast to the Chinese who are attempting to control corporate bond rates (BusinessInsider story here).

Breakingviews notes that investment banks, with the exception of Goldman, are currently focused on generating lower risk profits from client flow business....how cute and antiquated that sounds.

Here's a quick credit sector spread update:

Tightest sectors -

healthcare/pharma

technology

telecom

Widest sectors -

insurance

diversified financials

REITs

The average corporate bond price is currently ~$105.30 (using JPMorgan index data).

I've recently stumbled on an interesting function on the Bloomberg (machine, not news service). You can type REDQ to get real estate delinquency and foreclosure data graphed by region.