With global equities markets down 2-3% overnight, we're opening with wider spreads this morning.  The rumored increased Chinese stimulus package was just that....rumored.

The UK today gave us some good news and some bad news.  Aviva, an insurer, reported a heavy loss which sent the FTSE down pretty dramatically.  On the positive side, the Bank of England announced that it would be purchasing bonds (both gov't gilts and some corporates).  I suspect many eyes will be watching this program to see if it works and whether it would work over here.  This is in addition to a rate cut.

The recent TALF program to rejuvenate the ABS market has heretofore been met with positive response.  The WSJ did a good job explaining how it will work yesterday here.  We're now starting to see more pundits offering their counter opinions before it's even been implemented.

Ford announced what is likely to be only the first proposal of it's debt tender.  Ford bonds were higher on this news and credit default swaps rallied.  Naturally, debtholders were vehement in their desire for better terms.  

In Warren Buffett's annual letter, he mentions 4 times how 2009 will be lousy for his different lines.    

I find it very ironic that Standard and Poor's is now calling for rating agency reform.  They were the ones that assured us that a basket of risky, but uncorrelated assets, were deserving of AAA ratings.  Don't get me wrong, I'm a firm believer in caveat emptor....however, they should stick to fundamental credit research and not correlations.

The new issue market should be quiet today given equity weakness and spreads.

Daily commentary

We remain stronger on the day post the Fed's TALF announcement. This ABS centric program had always had one of the more positive taints of all the Fed programs.  At first glance, it seems to focus on "newly" or "recently originated" securitizations which could could hinder it's ability to help out the owners of the older more toxic deals.  Credit spreads were essentially unchanged on the announcement.

The Barclays Credit Index closed last night at +456bps.  The 3 month wides were +545 and the tights were +424.

New issue volumes remain muted due to volatility and earnings releases.  The only non FDIC deal on tap today is for Coca Cola (KO).

Secondary volumes were largely unchanged from January through February.  

Over the last few weeks,  lower quality credit has outperformed higher quality credit.  This is partially attributable to the banks (i.e. because of the FDIC wrap, they're considered higher quality [for now]).

Scanning JPMorgan's excellent cross asset class research, I noticed 2 equities that are 'underpriced' (if you believe CDS and equities are correlated).  CNA (should be ~$15) and MDT (should be ~$33) show up with high Z scores and healthy R squareds.