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Daily Market Commentary

Credit continues to grind wider as the turmoil in the financials finds no floor.  Yesterday, Paulson's testimony to congress caused a lot of volatility in the markets, sending FRE/FNM stock lower and credit wider from it's improved level once the government stepped in.  The GSE's ability to raise funds in the form of debt has not been hurt here, but they are paying slightly more for it.

This morning, US CPI follows up yesterday's PPI report in much the same fashion.  Headline (at 5.0% YoY) came in much higher than last month's 4.2%.  The core ticked up also to 2.4% from last month's 2.3% annualized.
Bonds are lower on this upwards surprise.  Inflation has remained very sticky given the weakness in the US economy and the seeming soft trend in employment.  We would blame this on the central banks showering the economy with liquidity to stave off the financial mess.

There will be more data out later this morning, including foreign purchases of domestic securities (TIC flows), capacity utilization numbers and Industrial production.



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