Daily Commentary

Secondary credit spreads are moving wider this morning lead by the underperforming banks and brokers.  Continued concerns over swine flu and new 'tough talk' from the GM bondholders group have credit investors picking and choosing their spots carefully.

A big jump in the just released consumer confidence number could turn this around quickly.

The new issue market continues to be impervious to broader market worries.  Potash announced a deal this morning and had ~$2B in interest in 34 minutes before the deal closed.  Several regional banks have or will come to market soon with new debt deals.

The sectors that could be negatively impacted by a potential epidemic have low index weights so that has had, so far, a muted impact on the index.  Conversely, the healthcare/pharma sub-sector could benefit and has a much larger index weight.

I'm surprised that CDS outstanding has not dropped post the mid-April Big Bang protocol.

A hedge fund is making some noise that MBIA may have triggered a succession event in their CDS when they split the company.  This could cause some volatility in the name.

Obviously, most of the chatter this morning is about the banks/brokers and potential need for further capital raises.  Here are approximate spreads over treasuries, in basis points, for ~10yr bonds and the change in spread overnight:

JPM ~350 +10

WFC       ~370 +5

GS ~430 unch

MS ~465  +15

BAC ~565 +15

C ~605 +25

MER ~680 +30