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Daily Market Commentary

Very light flows yesterday should continue into today (and the rest of the week).  There is very little to comment on in these markets, with data being very light and the market swaying on light volumes.


Yesterday's worldwide equity sell-off led to a bid under the treasury market, as you would expect.  Today's bond markets are more or less unchanged on the day.


We still see a discrepancy between the credit markets, particularly the total lack of risk taking in the money markets, and the equity markets (posting a VERY strong week last week).  Perhaps yesterday's equity selling was a little bit of these two opposed views reconciling somewhat.  Both sides are admittedly a little extreme, and both have come in a little recently.  The market is once again warming to a little bit of credit risk in the money markets by looking at Bankers acceptances and high quality corporate paper in the US.  We've thought it interesting that the market as a whole spent an entire week bidding up stocks, while completely avoiding commercial paper - an odd paradox considering CP would rank ahead of common shares in the event of a bankruptcy.



Longer term corporate bonds are starting to look attractive, as highlighted in our "Rubble" piece yesterday.  Stick with high quality corps in this environment and look for corp spreads to recover as the market looks through the current economic slowdown into a longer term continued expansion.


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