As I've mentioned almost daily, demand for credit remains strong. This Bloomberg story has a retail investor slant to it but cites Blackrock, Loomis and Fidelity flows.
While some may view the US Treasury as having some credit risk, this story shows that foreign demand for treasuries continues despite lower yields and predictions that it was waning.
When there is a continued demand for risk, or risk taking in this case, it indicates that the animal spirits remain positive. Today's evidence (here) is a story about Citadel opening a leveraged loan trading unit.
As I've stated before, the complexity and heterogeneity of securities in the credit default sector make it very difficult to regulate, trade electronically and clear. Creditsights brought the latest example to my attention. Thomson was recently determined to have triggered a credit event. This was determined by ISDA ex post facto (retroactive to June). Given that Thomson credit is referenced by most of the major European credit indices, it may be removed from those indices and they may now be considered bespoke (i.e. non-standard) and ineligible for most clearing efforts. This will not be true in the U.S. as this was a restructuring (not bankruptcy/failure to pay) and the U.S. indices do not consider restructurings. Clear as mud right?
Continuing on the theme that credit default swaps can be confusing, here is a story about the SEC hounding AIG for explanations and further disclosure of their positions well in advance of their rescue.
I'm surprised we have not seen more popular backlash against the ratings agencies. Here is one rant/editorial by the author of Snowball (Warren Buffet's bio) carried by Bloomberg news.
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