Zero Hedge

Spreads were tighter in the US as all the indices improved (as HY outperformed IG with the latter making all of its moves by 11amET and flatlining the rest of the day at 2009 tights - pulling modestly wider into the close). Indices typically underperformed single-names (thanks to some tail risk compression in CIT, ILFC, and TXTFI) with skews mostly narrower as IG underperformed but narrowed the skew, HVOL underperformed but narrowed the skew, ExHVOL outperformed pushing the skew wider, XO underperformed but compressed the skew, and HY outperformed but narrowed the skew. The IG curve steepened (in the face of TSY steepening) but remains significantly steeper than intrinsics as the steepening was more in the longer-end than we had seen in the short-end recently.

The names having the largest impact on IG are Metlife, Inc. (-45bps) pushing IG 0.36bps tighter (although intraday we saw CIT rally on more technically-driven protection selling with a late day gap back wider to unch), and Safeway Inc. (+5bps) adding 0.04bps to IG (we note that many of the very tightest CDS names stormed relatively tighter today as we suspect some Super Senior tranche hedges were unwound - MCD 3bps tighter to 20/25 for example as it misses and stock tanks). HVOL is more sensitive with Metlife, Inc. pushing it 1.61bps tighter, and Canadian Natural Resources Limited contributing -0.03bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both AT&T Inc. (-15bps) pushing the index 0.16bps tighter, and Safeway Inc. (+5bps) adding 0.05bps to ExHVOL.

The price of investment grade credit rose 0.26% to around 99.23% of par, while the price of high yield credits rose 1.5% to around 87.81% of par. ABX market prices are higher (improving) by 0.39% of par or in absolute terms, 1.93%. Broadly speaking, CMBX market prices are higher (improving) by 0.26% of par or in absolute terms, 0.06%. Volatility (VIX) is down -0.04pts to 23.43%, with 10Y TSY selling off (yield rising) 11.5bps to 3.66% and the 2s10s curve steepened by 4.1bps, as the cost of protection on US Treasuries fell 1.48bps to 31.845bps. 2Y swap spreads widened 0.8bps to 44bps, as the TED Spread widened by 0.2bps to 0.32% and Libor-OIS improved 0.2bps to 30.7bps.

The Dollar strengthened with DXY rising 0.47% to 79.073 (though its intraday swing was dramatic and clearly demarked the risk-on/risk-off line), Oil rising $1.75 to $67.15 (outperforming the dollar as the value of Oil (rebased to the value of gold) rose by 2.99% today (a 3.15% rise in the relative (dollar adjusted) value of a barrel of oil), and Gold dropping $2.9 to $948.5 as the S&P rallies (965.3 1.67%) outperforming IG credits (118.5bps 0.26%) while IG, which opened tighter at 124.25bps, underperforms HY credits. IG11 and XOver11 are -6.25bps and -21bps respectively while ITRX11 is -5.12bps to 95.88bps (breaking thru 100bps for the first time in this contract - back to pre-Lehman as FINLs outperform non-FINLs over there).

Dispersion fell -5bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion increasing more than expected today indicating a less systemic and more idiosyncratic spread widening/tightening at the tails.

66% of IG credits are shifting by more than 3bps and 70% of the CDX universe are also shifting significantly (more than the 5 day average of 60%). The number of names wider than the index decreased by 2 to 40 as the day's range rose to 8bps (one-week average 5.35bps), between low bid at 117 and high offer at 125 and higher beta credits (-5.67%) outperformed lower beta credits (-4.95%).

In IG, wideners were outpaced by tighteners by around 12-to-1, with only 8 credits notably wider. By sector, CONS saw 11% names wider, ENRGs 0% names wider, FINLs 10% names wider, INDUs 7% names wider, and TMTs 0% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) underperformed US (IG12 exFINLs) with the former trading at 97.85bps and the latter at 97.81bps.

Cross Market, we are seeing the HY-XOver spread compressing to 195.71bps from 223.54bps, and remains below the short-term average of 222.88bps, with the HY/XOver ratio falling to 1.3x, below its 5-day mean of 1.33x. The IG-Main spread compressed to 22.62bps from 23.75bps, but remains above the short-term average of 22bps, with the IG/Main ratio rising to 1.24x, above its 5-day mean of 1.21x.

In the US, non-financials outperformed financials as IG ExFINLs are tighter by 6bps to 97.8bps, with 96 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index fell 5.85bps to 122.79bps, with Finance names (worst) tighter by 2.9bps to 947.66bps, Brokers (best) tighter by 7.06bps to 141.89bps, and Banks tighter by 8.11bps to 166.47bps. Monolines are trading tighter on average by -141.58bps (5.33%) to 2458.51bps.

In IG, FINLs underperformed non-FINLs (3.54% tighter to 5.74% tighter respectively), with the former (IG FINLs) tighter by 12.6bps to 343bps, with 19 of the 21 names tighter. The IG CDS market (as per CDX) is 30.2bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (88.28bps), with the bond ETFs outperforming the IG CDS market by around 1.96bps.

In Europe, ITRX Main ex-FINLs (underperforming FINLs) rallied 4.43bps to 97.85bps (with ITRX FINLs -trending tighter- better by 7.88 to 88bps) and is currently trading tight to its week's range at 0%, between 113.94 to 97.85bps, and is trending tighter. Main LoVOL (trend tighter) is currently trading tight to its week's range at -0.01%, between 81.12 to 67.58bps. ExHVOL outperformed LoVOL as the differential compressed to -11.13bps from -7.41bps, and remains below the short-term average of -9.31bps. The Main exFINLS to IG ExHVOL differential decompressed to 41.4bps from 39.72bps, and remains above the short-term average of 40.79bps.

Commentary compliments of www.creditresearch.com

Index/Intrinsics Changes:

CDR LQD 50 NAIG091 -8.62bps to 142.79 (3 wider - 46 tighter <> 34 steeper - 15 flatter).
CDX12 IG -6.25bps to 118.5 ($0.26 to $99.23) (FV -6.9bps to 136.46) (9 wider - 114 tighter <> 84 steeper - 41 flatter) - Trend Tighter.
CDX12 HVOL -6.67bps to 315 (FV -18.19bps to 382.23) (0 wider - 30 tighter <> 28 steeper - 2 flatter) - Trend Tighter.
CDX12 ExHVOL -6.12bps to 56.45 (FV -3.66bps to 69.87) (9 wider - 86 tighter <> 39 steeper - 56 flatter).
CDX11 XO -11bps to 336.4 (FV -16.57bps to 405.38) (3 wider - 31 tighter <> 30 steeper - 4 flatter) - Trend Tighter.
CDX12 HY (30% recovery) Px $+1.5 to $87.81 / -48.8bps to 848 (FV -35.59bps to 790.55) (7 wider - 87 tighter <> 73 steeper - 22 flatter) - Trend Tighter.
LCDX12 (65% recovery) Px $+1.47 to $89.7 / -55.5bps to 567.58 - Trend Tighter.
MCDX12 -1.25bps to 168.75bps. - Trend Tighter.
CDR Counterparty Risk Index fell 5.62bps (-4.37%) to 123.03bps (1 wider - 13 tighter).
CDR Government Risk Index fell 1.25bps (-2.49%) to 48.94bps..
DXY strengthened 0.47% to 79.07.
Oil rose $1.52 to $66.92.
Gold fell $2.9 to $948.5.
VIX fell 0.04pts to 23.43%.
10Y US Treasury yields rose 11.3bps to 3.66%.
S&P500 Futures gained 1.67% to 965.3.

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Spreads were tighter in the US as all the indices improved (with HY outperforming IG even as IG saw its best close-to-close and open-to-close performance in over six weeks). Indices generally outperformed intrinsics with skews mostly narrower as IG's skew decompressed as the index beat intrinsics, HVOL underperformed but narrowed the skew, ExHVOL outperformed pushing the skew wider, XO underperformed but compressed the skew, and HY outperformed but narrowed the skew.

The names having the largest impact on IG are CIT Group Inc (-217.53bps) pushing IG 1.05bps tighter (CIT off its intraday tights by the close), and Textron Financial Corp (+8.32bps) adding 0.06bps to IG. HVOL is more sensitive with CIT Group Inc pushing it 4.71bps tighter, and Textron Financial Corp contributing 0.27bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Time Warner Cable Inc. (-24.5bps) pushing the index 0.25bps tighter, and Quest Diagnostics Incorporated (+2.37bps) adding 0.03bps to ExHVOL.

The price of investment grade credit rose 0.29% to around 98.73% of par (stalling at the 129bps recent swing tights), while the price of high yield credits rose 1.375% to around 85.38% of par. ABX market prices are higher (improving) by 0.27% of par or in absolute terms, 0.66%. Broadly speaking, CMBX market prices are higher (improving) by 0% of par or in absolute terms, 0%. Volatility (VIX) is up 0.85pts to 25.87%, with 10Y TSY selling off (yield rising) 15.3bps to 3.63% and the 2s10s curve steepened by 7.2bps, as the cost of protection on US Treasuries rose 1.08bps to 39bps. 2Y swap spreads widened 0.9bps to 45.94bps, as the TED Spread widened by 0.1bps to 0.34% and Libor-OIS improved 0.4bps to 31.4bps.

The Dollar weakened with DXY falling 0.99% to 79.387, Oil rising $2.22 to $61.74 (outperforming the dollar as the value of Oil (rebased to the value of gold) rose by 2.24% today (a 2.74% rise in the relative (dollar adjusted) value of a barrel of oil), and Gold increasing $13.5 to $939.2 as the S&P rallies (927.3 2.87%) outperforming IG credits (130.5bps 0.3% which we suspect reflects the rise in VIX dragging on spreads modestly) while IG, which opened tighter at 137bps, underperforms HY credits. IG11 and XOver11 are -7.14bps and -25.75bps respectively while ITRX11 is -5.62bps to 111.13bps.

Dispersion fell -15.8bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion increasing more than expected today indicating a less systemic and more idiosyncratic spread widening/tightening at the tails.

70% of IG credits are shifting by more than 3bps and 69% of the CDX universe are also shifting significantly (more than the 5 day average of 49%). The number of names wider than the index stayed at 47 as the day's range rose to 8.5bps (one-week average 5.9bps), between low bid at 129 and high offer at 137.5 and higher beta credits (-4.08%) underperformed lower beta credits (-4.69%).

In IG, wideners were dramatically outpaced by tighteners at around 20-to-1, with only a handful of credits notably wider (but notably many single-names gapped tighter which felt more squeeze than buying pressure). By sector, CONS saw 5% names wider, ENRGs 0% names wider, FINLs 0% names wider, INDUs 7% names wider, and TMTs 0% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) outperformed US (IG12 exFINLs) with the former trading at 111.66bps and the latter at 117.27bps.

Cross Market, we are seeing the HY-XOver spread compressing to 213.51bps from 234.87bps, and remains below the short-term average of 232.09bps, with the HY/XOver ratio falling to 1.3x, below its 5-day mean of 1.31x. The IG-Main spread compressed to 19.37bps from 20.75bps, and remains below the short-term average of 20.24bps, with the IG/Main ratio falling to 1.17x, above its 5-day mean of 1.17x.

In the US, non-financials underperformed financials as IG ExFINLs are tighter by 5.3bps to 117.3bps, with 99 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index fell 6.98bps to 146.96bps, with Finance names (worst) tighter by 28.9bps to 773.38bps, Banks (best) tighter by 10.93bps to 193.72bps, and Brokers tighter by 8.25bps to 163.33bps. Monolines are trading tighter on average by -162.94bps (4.18%) to 2752.24bps.

In IG, FINLs outperformed non-FINLs (4.37% tighter to 4.29% tighter respectively), with the former (IG FINLs) tighter by 16.1bps to 352.8bps, with 19 of the 21 names tighter. The IG CDS market (as per CDX) is 27.2bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (103.28bps), with the bond ETFs underperforming the IG CDS market by around 1.16bps.

In Europe, ITRX Main ex-FINLs (underperforming FINLs) rallied 5.28bps to 111.66bps (with ITRX FINLs -trending tighter- better by 7 to 109bps) and is currently trading tight to its week's range at 0%, between 126.69 to 111.66bps, and is trending tighter. Main LoVOL (trend tighter) is currently trading tight to its week's range at 0.04%, between 89.67 to 79.43bps. ExHVOL outperformed LoVOL as the differential compressed to -9.72bps from -7.04bps, but remains below the short-term average of -6.31bps. The Main exFINLS to IG ExHVOL differential decompressed to 41.95bps from 41.18bps, but remains above the short-term average of 41.07bps.

Commentary compliments of www.creditresearch.com

Index/Intrinsics Changes

CDR LQD 50 NAIG091 -7.61bps to 166.81 (1 wider - 48 tighter <> 35 steeper - 14 flatter).
CDX12 IG -7bps to 130.5 ($0.29 to $98.73) (FV -6.94bps to 154.6) (4 wider - 118 tighter <> 88 steeper - 35 flatter) - Trend Tighter.
CDX12 HVOL -10bps to 323 (FV -17.5bps to 404.9) (1 wider - 28 tighter <> 26 steeper - 4 flatter) - No Trend.
CDX12 ExHVOL -6.05bps to 69.71 (FV -3.93bps to 83.99) (3 wider - 92 tighter <> 33 steeper - 62 flatter).
CDX11 XO -9.1bps to 366.4 (FV -13.13bps to 447.27) (2 wider - 30 tighter <> 27 steeper - 7 flatter) - Trend Tighter.
CDX12 HY (30% recovery) Px $+1.25 to $85.25 / -42.9bps to 932.5 (FV -38.29bps to 880.84) (3 wider - 88 tighter <> 80 steeper - 12 flatter) - Trend Tighter.
LCDX12 (65% recovery) Px $+1.55 to $86.25 / -70.29bps to 705.67 - Trend Tighter.
MCDX12 -15bps to 185bps. - Trend Tighter.
CDR Counterparty Risk Index fell 6.36bps (-4.13%) to 147.59bps (0 wider - 14 tighter).
CDR Government Risk Index fell 2.32bps (-3.79%) to 58.91bps..
DXY weakened 0.99% to 79.39.
Oil rose $2.22 to $61.74.
Gold rose $13.5 to $939.2.
VIX increased 0.91pts to 25.88%.
10Y US Treasury yields rose 15.1bps to 3.63%.
S&P500 Futures gained 2.87% to 927.3.

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Spreads were tighter in the US as all the indices improved (with credit curves flattening/inverting in the face of significant TSY steepening today). Indices generally outperformed intrinsics with skews widening in general as IG's skew decompressed as the index beat intrinsics, HVOL outperformed but widened the skew, ExHVOL outperformed pushing the skew wider, XO's skew increased as the index outperformed, and HY's skew widened as it underperformed.

Only 11.2% of names in IG moved more than their historical vol would imply as higher vol names underperformed lower vol names by -1.53% to -2.53%. Intraday ranges for IG and HY were very low at 4bps and 24bps respectively as IG held at one-week tights closing just under the magic 140bps level (the range-bound market continues) as investors seemed to turn their attention to LCDX more than HY today.

The names having the largest impact on IG are CIT Group Inc (-144.58bps but swung between -300bps and unch intraday with a late surge of profit-taking seeming enough to drag it 1-2pts tighter) pushing IG 0.64bps tighter, and International Lease Finance Corp. (+199.13bps) adding 1.25bps to IG. HVOL is more sensitive with CIT Group Inc pushing it 2.9bps tighter, and International Lease Finance Corp. contributing 5.65bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Valero Energy Corp. (-15bps) pushing the index 0.15bps tighter, and Devon Energy Corporation (+8bps) adding 0.08bps to ExHVOL.

The price of investment grade credit rose 0.12% to around 98.37% of par, while the price of high yield credits rose 0.37% to around 84% of par. ABX market prices are higher (improving) by 0.49% of par or in absolute terms, 1.5%. Broadly speaking, CMBX market prices are lower by 0.73% of par or in absolute terms, 0.24% (not helped by GS writedowns and S&P downgrades). Volatility (VIX) is down -1.29pts to 25.02% (more dispersion trading pre OPEX?), with 10Y TSY selling off (yield rising) 11.1bps to 3.46% and the 2s10s curve steepened by 7.2bps (as PPI came in higher than expected), as the cost of protection on US Treasuries fell 2bps to 38bps. 2Y swap spreads widened 2.1bps to 44.38bps, as the TED Spread widened by 0.4bps to 0.34% and Libor-OIS deteriorated 0.3bps to 31.8bps.

The Dollar strengthened with DXY rising 0.05% to 80.166, Oil falling $0.25 to $59.44 (underperforming the dollar as the value of Oil (rebased to the value of gold) fell by 0.96% today (a 0.37% drop in the relative (dollar adjusted) value of a barrel of oil), and Gold increasing $5.05 to $925.35 as the S&P rallies (901.8 0.69%) outperforming IG credits (139bps 0.12%) while IG, which opened tighter at 141.75bps, underperforms HY credits. IG11 and XOver11 are -4.42bps and -25.75bps respectively while ITRX11 is -6bps to 116.75bps.

The majority of credit curves flattened as the vol term structure steepened with VIX/VIXV decreasing implying a more bearish/more volatile short-term outlook (normally indicative of short-term spread decompression expectations), and additionally the ratio has dropped below 0.9x which is exceptionally bearish for stocks and spreads.

Dispersion fell -2bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion increasing more than expected today indicating a less systemic and more idiosyncratic spread widening/tightening at the tails.

42% of IG credits are shifting by more than 3bps and 49% of the CDX universe are also shifting significantly (more than the 5 day average of 46%). The number of names wider than the index increased by 1 to 47 as the day's range fell to 4.75bps (one-week average 4.95bps), between low bid at 137.5 and high offer at 142.25 and higher beta credits (-0.94%) underperformed lower beta credits (-2.14%).

In IG, wideners were outpaced by tighteners by around 4-to-1, with only 17 credits notably wider. By sector, CONS saw 8% names wider, ENRGs 31% names wider, FINLs 24% names wider, INDUs 11% names wider, and TMTs 4% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) outperformed US (IG12 exFINLs) with the former trading at 116.94bps and the latter at 122.39bps.

Cross Market, we are seeing the HY-XOver spread decompressing to 232.58bps from 219.61bps, but remains below the short-term average of 237.06bps, with the HY/XOver ratio rising to 1.31x, above its 5-day mean of 1.31x. The IG-Main spread decompressed to 22.25bps from 19.13bps, and remains above the short-term average of 21.34bps, with the IG/Main ratio rising to 1.19x, above its 5-day mean of 1.18x.

In the US, non-financials outperformed financials as IG ExFINLs are tighter by 2.2bps to 122.4bps, with 83 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index fell 3.79bps to 154.02bps, with Finance names (worst) wider by 0.68bps to 813.48bps, Banks (best) tighter by 6bps to 204.76bps, and Brokers tighter by 3.13bps to 171.58bps. Monolines are trading wider on average by 9.63bps (0.87%) to 2866.2bps.

In IG, FINLs underperformed non-FINLs (0.68% wider to 1.79% tighter respectively), with the former (IG FINLs) wider by 2.5bps to 366.8bps, with 12 of the 21 names tighter. The IG CDS market (as per CDX) is 29.9bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (109.12bps), with the bond ETFs outperforming the IG CDS market by around 1.06bps.

In Europe, ITRX Main ex-FINLs (outperforming FINLs) rallied 6.5bps to 116.94bps (with ITRX FINLs -trading sideways- better by 4 to 116bps) and is currently trading tight to its week's range at 0%, between 126.69 to 116.94bps, and is trending tighter. Main LoVOL (sideways trading) is currently trading tight to its week's range at 0.04%, between 89.67 to 82.8bps. ExHVOL underperformed LoVOL as the differential decompressed to -5.7bps from -10.61bps, but remains below the short-term average of -3.59bps. The Main exFINLS to IG ExHVOL differential compressed to 39.83bps from 44.38bps, but remains above the short-term average of 39.1bps.

Commentary compliments of www.creditresearch.com

Index/Intrinsics Changes

CDR LQD 50 NAIG091 -3.98bps to 172.82 (3 wider - 41 tighter <> 34 steeper - 14 flatter).
CDX12 IG -2.88bps to 139 ($0.12 to $98.37) (FV -1.51bps to 150.95) (17 wider - 95 tighter <> 73 steeper - 50 flatter) - Trend Tighter.
CDX12 HVOL -5.82bps to 335 (FV -0.02bps to 423.9) (7 wider - 21 tighter <> 17 steeper - 13 flatter) - Trend Wider.
CDX12 ExHVOL -1.95bps to 77.11 (FV -1.93bps to 87.69) (10 wider - 85 tighter <> 39 steeper - 56 flatter).
CDX11 XO -6.1bps to 376.5 (FV -5.75bps to 463.03) (5 wider - 24 tighter <> 18 steeper - 16 flatter) - No Trend.
CDX12 HY (30% recovery) Px $+0.37 to $84 / -12.8bps to 973.1 (FV -16.61bps to 911.3) (17 wider - 71 tighter <> 68 steeper - 26 flatter) - Trend Tighter.
LCDX12 (65% recovery) Px $+0.45 to $84.55 / -21.27bps to 766.61 - Trend Tighter.
MCDX12 -7.5bps to 200bps. - Trend Tighter.
CDR Counterparty Risk Index fell 3.66bps (-2.32%) to 154.15bps (2 wider - 12 tighter).
CDR Government Risk Index fell 1.81bps (-2.85%) to 61.67bps..
DXY strengthened 0.05% to 80.17.
Oil fell $0.25 to $59.44.
Gold rose $5.05 to $925.35.
VIX fell 1.29pts to 25.02%.
10Y US Treasury yields rose 11.1bps to 3.46%.
S&P500 Futures gained 0.69% to 901.8. Sphere: Related Content

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Spreads were mixed in the US with IG tighter, HVOL improving, ExHVOL weaker, XO stronger, and HY selling off (but notably changes in credit markets were significantly less positive than in equities). Indices typically underperformed single-names with skews widening in general as IG's skew decompressed as the index beat intrinsics, HVOL outperformed but widened the skew, ExHVOL intrinsics beat and narrowed the skew, XO underperformed but compressed the skew, and HY's skew widened as it underperformed.

ONLY 2.4% of names in IG moved more than their historical vol would imply as higher vol names outperformed lower vol names by -0.94% to -0.82%. IG's vol is around 4.38% per 1 day period, which leaves 98 names higher vol and 27 lower vol than the index.

The names having the largest impact on IG are American International Group, Inc. (-96.23bps) pushing IG 0.52bps tighter, and CIT Group Inc (+33.66bps) adding 0.17bps to IG. HVOL is more sensitive with American International Group, Inc. pushing it 2.31bps tighter, and CIT Group Inc contributing 0.76bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Wells Fargo & Company (-7bps) pushing the index 0.07bps tighter, and Comcast Corp. (+7.5bps) adding 0.08bps to ExHVOL.

The price of investment grade credit rose 0.08% to around 98.35% of par, while the price of high yield credits fell 0% to around 83% of par. ABX market prices are higher (improving) by 0.15% of par or in absolute terms, 0.31%. Broadly speaking, CMBX market prices are lower by 0.03% of par or in absolute terms, 0%. Volatility (VIX) is down -2.69pts to 26.36%, with 10Y TSY rallying (yield falling) 14.7bps to 3.54% and the 2s10s curve flattened by 6.8bps, as the cost of protection on US Treasuries rose 3.27bps to 43.5bps. 2Y swap spreads tightened 2.7bps to 37.23bps, as the TED Spread widened by 1.2bps to 0.44% and Libor-OIS deteriorated 1.4bps to 38.2bps.

The Dollar weakened with DXY falling 0.24% to 80.363, Oil rising $1.65 to $70.32 (outperforming the dollar as the value of Oil (rebased to the value of gold) rose by 1.55% today (a 2.16% rise in the relative (dollar adjusted) value of a barrel of oil), and Gold increasing $7.85 to $939.25 as the S&P rallies (916.8 2.09%) outperforming IG credits (139.25bps 0.08%) while IG, which opened wider at 141.5bps, outperforms HY credits. IG11 and XOver11 are -2.75bps and +4.5bps respectively while ITRX11 is +0.38bps to 121.38bps.

The majority of credit curves steepened as the vol term structure steepened with VIX/VIXV decreasing implying a more bearish/more volatile short-term outlook (normally indicative of short-term spread decompression expectations), and additionally the ratio has dropped below 0.9x which is exceptionally bearish for stocks and spreads.

Dispersion fell 3.1bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion increasing more than expected today indicating a less systemic and more idiosyncratic spread widening/tightening at the tails.

Only 20% of IG credits are shifting by more than 3bps and 39% of the CDX universe are also shifting significantly (less than the 5 day average of 49%). The number of names wider than the index increased by 1 to 47 as the day's range fell to 5.75bps (one-week average 5.43bps), between low bid at 137.5 and high offer at 143.25 and higher beta credits (-0.47%) underperformed lower beta credits (-1.13%).

In IG, wideners were outpaced by tighteners by around 2-to-1, with a mere 28 credits notably wider. By sector, CONS saw 14% names wider, ENRGs 44% names wider, FINLs 19% names wider, INDUs 14% names wider, and TMTs 35% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) underperformed US (IG12 exFINLs) with the former trading at 122.26bps and the latter at 119.88bps.

Cross Market, we are seeing the HY-XOver spread compressing to 260.14bps from 264.64bps, but remains below the short-term average of 294.16bps, with the HY/XOver ratio falling to 1.35x, below its 5-day mean of 1.39x. The IG-Main spread compressed to 17.87bps from 20bps, and remains below the short-term average of 19.54bps, with the IG/Main ratio falling to 1.15x, below its 5-day mean of 1.16x.

In the US, non-financials underperformed financials as IG ExFINLs are tighter by 1bps to 119.9bps, with 59 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index fell 2.08bps to 167.59bps, with Finance names (worst) wider by 6.2bps to 739.7bps, Brokers (best) tighter by 3.63bps to 194.58bps, and Banks tighter by 2.29bps to 228.62bps. Monolines are trading tighter on average by -45.59bps (0.41%) to 2853.33bps.

In IG, FINLs just outperformed non-FINLs (1% tighter to 0.82% tighter respectively), with the former (IG FINLs) tighter by 3.5bps to 347.2bps, with 11 of the 21 names tighter. The IG CDS market (as per CDX) is 31.6bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (107.69bps), with the bond ETFs underperforming the IG CDS market by around 7.45bps.

In Europe, ITRX Main ex-FINLs (underperforming FINLs) widened 0.73bps to 122.26bps (with ITRX FINLs -trading sideways- better by 1 to 117.88bps) and is currently trading tight to its week's range at 22.08%, between 129 to 120.35bps, and is trading sideways. Main LoVOL (sideways trading) is currently trading tight to its week's range at 20.74%, between 87.99 to 81.86bps. ExHVOL outperformed LoVOL as the differential compressed to -0.57bps from -0.05bps, but remains below the short-term average of 0.01bps. The Main exFINLS to IG ExHVOL differential decompressed to 39.69bps from 39.58bps, but remains below the short-term average of 39.87bps.

Commentary compliments of www.creditresearch.com

Index/Intrinsics Changes

CDR LQD 50 NAIG091 -1.82bps to 174.96 (9 wider - 29 tighter <> 29 steeper - 20 flatter).

CDX12 IG -2.5bps to 138.5 ($0.11 to $98.38) (FV -1.31bps to 156.06) (27 wider - 66 tighter <> 76 steeper - 48 flatter) - Trend Tighter.

CDX12 HVOL -5.5bps to 322.5 (FV -3.35bps to 395.82) (6 wider - 15 tighter <> 19 steeper - 11 flatter) - Trend Tighter.

CDX12 ExHVOL -1.55bps to 80.39 (FV -0.72bps to 87.93) (21 wider - 74 tighter <> 38 steeper - 57 flatter).

CDX11 XO -1bps to 373.8 (FV -1.39bps to 451.44) (12 wider - 17 tighter <> 18 steeper - 15 flatter) - Trend Wider.

CDX12 HY (30% recovery) Px $0 to $83 / 0bps to 1009.9 (FV -16.33bps to 907.5) (32 wider - 53 tighter <> 56 steeper - 34 flatter) - Trend Tighter.

LCDX12 (65% recovery) Px $+0.65 to $83.25 / -33.38bps to 824.02 - Trend Tighter.

MCDX12 +5bps to 220bps. - Trend Wider.

CDR Counterparty Risk Index fell 1.89bps (-1.11%) to 167.78bps (4 wider - 10 tighter).

CDR Government Risk Index fell 1.27bps (-2%) to 62.36bps..

DXY weakened 0.24% to 80.36.

Oil rose $1.65 to $70.32.

Gold rose $7.85 to $939.25.

VIX fell 2.69pts to 26.36%.

10Y US Treasury yields fell 15.1bps to 3.54%.

S&P500 Futures gained 2.09% to 916.8. Sphere: Related Content

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Spreads were tighter in the US as all the indices improved (though 2-3bps wider than the pre-FOMC tights in IG). Indices generally outperformed intrinsics with skews widening in general as IG's skew decompressed as the index beat intrinsics, HVOL outperformed but widened the skew, ExHVOL outperformed pushing the skew wider, XO's skew increased as the index outperformed, and HY outperformed but narrowed the skew.

Only 9.6% of names in IG moved more than their historical vol would imply as higher vol names underperformed lower vol names by -1.23% to -1.87%. IG's vol is around 4.38% per 1 day period, which leaves 98 names higher vol and 27 lower vol than the index.

The names having the largest impact on IG are CIT Group Inc (-35.86bps) pushing IG 0.18bps tighter, and Constellation Energy Group Inc. (+22.5bps) adding 0.18bps to IG. HVOL is more sensitive with CIT Group Inc pushing it 0.81bps tighter, and American International Group, Inc. contributing 0.68bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Toll Brothers, Inc. (-8.75bps) pushing the index 0.09bps tighter, and Constellation Energy Group Inc. (+22.5bps) adding 0.23bps to ExHVOL.

The price of investment grade credit rose 0.2% to around 98.29% of par, while the price of high yield credits rose 1.37% to around 83% of par. ABX market prices are higher (improving) by 0.1% of par or in absolute terms, 0.78%. Broadly speaking, CMBX market prices are higher (improving) by 0.62% of par or in absolute terms, 0.2%. Volatility (VIX) is down 1.53pts to 29.05%, with 10Y TSY selling off (yield rising) 7.2bps to 3.7% and the 2s10s curve flattened by 3.6bps, as the cost of protection on US Treasuries fell 7.36bps to 39.5bps. 2Y swap spreads tightened 6.3bps to 39.95bps, as the TED Spread widened by 0.7bps to 0.42% and Libor-OIS improved 0.1bps to 36.8bps.

The Dollar strengthened with DXY rising 0.87% to 80.539, Oil falling $0.64 to $68.6 (underperforming the dollar as the value of Oil (rebased to the value of gold) fell by 1.52% today (a 0.05% drop in the relative (dollar adjusted) value of a barrel of oil), and Gold increasing $5.57 to $931.4 as the S&P rallies (897.4 0.81%) outperforming IG credits (140.75bps 0.2%) while IG, which opened tighter at 143bps, underperforms HY credits. IG11 and XOver11 are -4bps and -28bps respectively while ITRX11 is -7.12bps to 121.13bps.

The majority of credit curves flattened as the vol term structure steepened with VIX/VIXV decreasing implying a more bearish/more volatile short-term outlook (normally indicative of short-term spread decompression expectations).

Dispersion fell -0.7bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion increasing more than expected today indicating a less systemic and more idiosyncratic spread widening/tightening at the tails.

Only 35% of IG credits are shifting by more than 3bps and 50% of the CDX universe are also shifting significantly (less than the 5 day average of 52%). The number of names wider than the index stayed at 46 as the day's range rose to 6bps (one-week average 5.98bps), between low bid at 138 and high offer at 144 and higher beta credits (-1.13%) underperformed lower beta credits (-1.48%).

In IG, wideners were outpaced by tighteners by around 3-to-1, with only 30 credits notably wider. By sector, CONS saw 30% names wider, ENRGs 19% names wider, FINLs 33% names wider, INDUs 14% names wider, and TMTs 22% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) outperformed US (IG12 exFINLs) with the former trading at 121.73bps and the latter at 120.6bps.

Cross Market, we are seeing the HY-XOver spread compressing to 266.97bps from 288.65bps, but remains below the short-term average of 297.86bps, with the HY/XOver ratio falling to 1.36x, below its 5-day mean of 1.4x. The IG-Main spread decompressed to 19.62bps from 17.25bps, and remains above the short-term average of 19.37bps, with the IG/Main ratio rising to 1.16x, above its 5-day mean of 1.16x.

In the US, non-financials outperformed financials as IG ExFINLs are tighter by 1.9bps to 120.6bps, with 69 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index fell 5.32bps to 169.18bps, with Finance names (worst) tighter by 8.52bps to 737.52bps, Brokers (best) tighter by 4.5bps to 198.2bps, and Banks tighter by 4.07bps to 231.83bps. Monolines are trading wider on average by 175.19bps (5.73%) to 3001.47bps.

In IG, FINLs underperformed non-FINLs (0.54% tighter to 1.58% tighter respectively), with the former (IG FINLs) tighter by 1.9bps to 352.3bps, with 11 of the 21 names tighter. The IG CDS market (as per CDX) is 38.8bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (101.99bps), with the bond ETFs outperforming the IG CDS market by around 0.61bps.

In Europe, ITRX Main ex-FINLs (outperforming FINLs) rallied 7.27bps to 121.73bps (with ITRX FINLs -trading sideways- better by 6.5 to 118.75bps) and is currently trading tight to its week's range at 15.95%, between 129 to 120.35bps, and is trading sideways. Main LoVOL (sideways trading) is currently trading tight to its week's range at 11.51%, between 87.99 to 81.86bps. ExHVOL underperformed LoVOL as the differential decompressed to 0.08bps from -1.86bps, but remains below the short-term average of 0.44bps. The Main exFINLS to IG ExHVOL differential compressed to 39.09bps from 42.87bps, and remains below the short-term average of 39.62bps.

Commentary compliments of www.creditresearch.com

Index/Intrinsics Changes

CDR LQD 50 NAIG091 -2.11bps to 176.72 (9 wider - 31 tighter <> 23 steeper - 24 flatter).

CDX12 IG -5bps to 140.5 ($0.21 to $98.3) (FV -2.06bps to 157.22) (28 wider - 79 tighter <> 59 steeper - 65 flatter) - No Trend.

CDX12 HVOL -11.5bps to 322 (FV -4.98bps to 399.97) (7 wider - 20 tighter <> 19 steeper - 11 flatter) - No Trend.

CDX12 ExHVOL -2.95bps to 83.18 (FV -1.21bps to 88.35) (21 wider - 74 tighter <> 55 steeper - 40 flatter).

CDX11 XO -8bps to 374.5 (FV -7.21bps to 453.29) (8 wider - 23 tighter <> 19 steeper - 14 flatter) - Trend Wider.

CDX12 HY (30% recovery) Px $+1.31 to $82.94 / -47.6bps to 1014.6 (FV -10.67bps to 919.83) (19 wider - 70 tighter <> 55 steeper - 37 flatter) - Trend Tighter.

LCDX12 (65% recovery) Px $+1.45 to $82.65 / -79.35bps to 852.35 - Trend Wider.

MCDX12 +2bps to 215bps. - Trend Wider.

CDR Counterparty Risk Index fell 5.12bps (-2.93%) to 169.38bps (2 wider - 12 tighter).

CDR Government Risk Index fell 4.71bps (-6.91%) to 63.47bps.

DXY strengthened 0.87% to 80.54.

Oil fell $0.64 to $68.6.

Gold rose $5.57 to $931.4.

VIX fell 1.53pts to 29.05%.

10Y US Treasury yields rose 7.2bps to 3.7%.

S&P500 Futures gained 0.81% to 897.4. Sphere: Related Content

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Spreads were mixed in the US with IG marginally worse, HVOL a smidge wider, ExHVOL weaker, XO wider, and HY rallying (as intraday ranges were generally half their average levels). Indices generally outperformed intrinsics (with curves flattening and rolls decompressing as unwinds seem the theme of the week) with skews widening in general as IG's skew decompressed as the index beat intrinsics, HVOL outperformed but widened the skew, ExHVOL intrinsics beat and narrowed the skew, XO's skew increased as the index outperformed, and HY outperformed but narrowed the skew.

The names having the largest impact on IG are Xerox Corp. (-17.5bps) pushing IG 0.13bps tighter, and CIT Group Inc (+131.03bps) adding 0.65bps to IG. HVOL is more sensitive with Xerox Corp. pushing it 0.6bps tighter, and CIT Group Inc contributing 2.94bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Verizon Communications Inc (-7bps) pushing the index 0.07bps tighter, and Constellation Energy Group Inc. (+18bps) adding 0.18bps to ExHVOL.

The price of investment grade credit fell 0.03% to around 98.07% of par, while the price of high yield credits rose 0.285% to around 81.38% of par. ABX market prices are higher (improving) by 0.08% of par or in absolute terms, 0.94%. Broadly speaking, CMBX market prices are higher (improving) by 0.21% of par or in absolute terms, 0.07%. Volatility (VIX) is down -0.59pts to 30.58%, with 10Y TSY rallying (yield falling) 4.3bps to 3.64% and the 2s10s curve flattened by 1.8bps, as the cost of protection on US Treasuries rose 0.91bps to 47bps. 2Y swap spreads tightened 0.5bps to 46bps, as the TED Spread tightened by 1.3bps to 0.41% and Libor-OIS improved 0.1bps to 37.1bps.

The Dollar weakened with DXY falling 1.17% to 79.838, Oil rising $2.28 to $69.21 (outperforming the dollar as the value of Oil (rebased to the value of gold) rose by 3.04% today (a 2.24% rise in the relative (dollar adjusted) value of a barrel of oil), and Gold increasing $3.28 to $925.98 as the S&P rallies (890.2 0.18%) outperforming IG credits (146bps -0.03%) while IG, which opened wider at 147.25bps, underperforms HY credits. IG11 and XOver11 are +0.13bps and +12.85bps respectively while ITRX11 is +2.04bps to 128.25bps.

The majority of credit curves flattened as the vol term structure flattened with VIX/VIXV rising implying a more bearish/less volatile short-term outlook (normally indicative of short-term spread decompression expectations).

Dispersion rose 14bps in IG (as it appears the shift from syetemic to idiosyncratic risk is occurring again). Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion decreasing more than expected today indicating a less systemic and more idiosyncratic narrowing of the distribution of spreads.

Only 36% of IG credits are shifting by more than 3bps and 44% of the CDX universe are also shifting significantly (less than the 5 day average of 55%). The number of names wider than the index stayed at 46 as the day's range fell to 4.75bps (one-week average 6.88bps), between low bid at 144 and high offer at 148.75 and higher beta credits (1.95%) underperformed lower beta credits (-0.39%).

In IG, wideners outpaced tighteners by around 3-to-2, with 52 credits notably wider. By sector, CONS saw 35% names wider, ENRGs 44% names wider, FINLs 76% names wider, INDUs 46% names wider, and TMTs 13% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) underperformed US (IG12 exFINLs) with the former trading at 129bps and the latter at 123.05bps.

Cross Market, we are seeing the HY-XOver spread compressing to 290.52bps from 313.96bps, and remains below the short-term average of 294.84bps, with the HY/XOver ratio falling to 1.37x, below its 5-day mean of 1.39x. The IG-Main spread compressed to 17.75bps from 19.04bps, but remains below the short-term average of 19.62bps, with the IG/Main ratio falling to 1.14x, below its 5-day mean of 1.16x.

In the US, non-financials outperformed financials as IG ExFINLs are tighter by 0.2bps to 123bps, with 53 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index rose 1.96bps to 174.2bps, with Finance names (worst) wider by 20.87bps to 747.01bps, Brokers (best) wider by 1.25bps to 202.08bps, and Banks wider by 4.29bps to 234.26bps. Monolines are trading wider on average by 55.79bps (1.86%) to 2847.43bps.

In IG, FINLs underperformed non-FINLs (6.04% wider to 0.15% tighter respectively), with the former (IG FINLs) wider by 20.2bps to 353.8bps, with 3 of the 21 names tighter. The IG CDS market (as per CDX) is 38.6bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (107.35bps), with the bond ETFs outperforming the IG CDS market by around 1.23bps.

In Europe, ITRX Main ex-FINLs (outperforming FINLs) widened 1.78bps to 129bps (with ITRX FINLs -trending wider- weaker by 3.08 to 125.25bps) and is currently trading at the wides of the week's range at 100%, between 129 to 117.39bps, and is trending wider. Main LoVOL (trend wider) is currently trading at the wides of the week's range at 100%, between 87.75 to 77.53bps. ExHVOL outperformed LoVOL as the differential compressed to -1.43bps from -1.05bps, but remains below the short-term average of 1.68bps. The Main exFINLS to IG ExHVOL differential decompressed to 42.68bps from 41.89bps, but remains above the short-term average of 38.54bps.

Commentary compliments of www.creditresearch.com

Index/Intrinsics Changes

CDR LQD 50 NAIG091 +2.19bps to 178.7 (24 wider - 18 tighter <> 25 steeper - 24 flatter).

CDX12 IG +0.25bps to 145.5 ($-0.03 to $98.07) (FV +3.08bps to 159.69) (52 wider - 55 tighter <> 67 steeper - 58 flatter) - Trend Wider.

CDX12 HVOL 0bps to 335 (FV +13.1bps to 406.63) (16 wider - 9 tighter <> 13 steeper - 17 flatter) - Trend Wider.

CDX12 ExHVOL +0.33bps to 85.66 (FV +0.21bps to 89.73) (36 wider - 59 tighter <> 41 steeper - 54 flatter).

CDX11 XO +4.8bps to 381.3 (FV +5.14bps to 463.36) (18 wider - 10 tighter <> 15 steeper - 17 flatter) - Trend Wider.

CDX12 HY (30% recovery) Px $+0.28 to $81.375 / -10.6bps to 1071 (FV +3.65bps to 932.15)
(53 wider - 29 tighter <> 36 steeper - 56 flatter) - Trend Wider.

LCDX12 (65% recovery) Px $+0.5 to $80.95 / -28.99bps to 925.3 - Trend Wider.

MCDX12 +7bps to 215bps. - Trend Wider.

CDR Counterparty Risk Index rose 2.07bps (1.2%) to 174.31bps (12 wider - 2 tighter).

CDR Government Risk Index rose 1.02bps (1.51%) to 68.13bps..

DXY weakened 1.17% to 79.84.

Oil rose $2.28 to $69.21.

Gold rose $3.28 to $925.98.

VIX fell 0.59pts to 30.58%.

10Y US Treasury yields fell 4.5bps to 3.64%.

S&P500 Futures gained 0.18% to 890.2. Sphere: Related Content

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Spreads were broadly wider in the US as all the indices deteriorated. Indices generally outperformed intrinsics (as post-roll derisking covered by index hedges seemed prevalent) with skews widening in general as IG's skew decompressed as the index beat intrinsics, HVOL outperformed but widened the skew, ExHVOL outperformed pushing the skew wider, XO's skew increased as the index outperformed, and HY outperformed but narrowed the skew.

The names having the largest impact on IG are Computer Sciences Corp. (-2.1bps) pushing IG 0.02bps tighter, and CIT Group Inc (+150.87bps) adding 0.78bps to IG. HVOL is more sensitive with RR Donnelley & Sons Company pushing it 0.19bps tighter, and CIT Group Inc contributing 3.47bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Computer Sciences Corp. (-2.1bps) pushing the index 0.02bps tighter, and Southwest Airlines Co. (+15.39bps) adding 0.15bps to ExHVOL.

The price of investment grade credit fell 0.19% to around 98.06% of par, while the price of high yield credits fell 0.63% to around 81% of par. ABX market prices are lower by 0.06% of par or in absolute terms, 0.17%. Broadly speaking, CMBX market prices are higher (improving) by 0% of par or in absolute terms, 0%. Volatility (VIX) is up 3.18pts to 31.17%, with 10Y TSY rallying (yield falling) 9.8bps to 3.69% and the 2s10s curve flattened by 2.5bps, as the cost of protection on US Treasuries rose 1.25bps to 45.5bps. 2Y swap spreads tightened 1.1bps to 46.56bps, as the TED Spread tightened by 1.9bps to 0.42% and Libor-OIS improved 0.3bps to 36.9bps.

The Dollar strengthened with DXY rising 0.71% to 80.835, Oil falling $2.62 to $66.93 (underperforming the dollar as the value of Oil (rebased to the value of gold) fell by 2.56% today (a 3.06% drop in the relative (dollar adjusted) value of a barrel of oil), and Gold dropping $11.55 to $922.5 as the S&P is down (889.1 -2.9%) underperforming IG credits (146.25bps -0.19%) while IG, which opened wider at 144.25bps, outperforms HY credits. IG11 and XOver11 are +5.22bps and +26.06bps respectively while ITRX11 is +6.46bps to 126.13bps.

The majority of credit curves flattened as the vol term structure flattened with VIX/VIXV rising implying a more bullish/less volatile short-term outlook (normally indicative of short-term spread compression expectations).

Dispersion rose 11.9bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion decreasing more than expected today indicating a less systemic and more idiosyncratic narrowing of the distribution of spreads.

57% of IG credits are shifting by more than 3bps and 65% of the CDX universe are also shifting significantly (more than the 5 day average of 59%). The number of names wider than the index stayed at 46 as the day's range fell to 5bps (one-week average 8.18bps), between low bid at 143 and high offer at 148 and higher beta credits (4.93%) underperformed lower beta credits (3.41%).

In IG, wideners outpaced tighteners by around 11-to-1, with 109 credits wider. By sector, CONS saw 81% names wider, ENRGs 81% names wider, FINLs 90% names wider, INDUs 93% names wider, and TMTs 91% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) underperformed US (IG12 exFINLs) with the former trading at 127.1bps and the latter at 123.38bps.

Cross Market, we are seeing the HY-XOver spread compressing to 317.83bps from 320.43bps, but remains above the short-term average of 281.84bps, with the HY/XOver ratio falling to 1.41x, above its 5-day mean of 1.38x. The IG-Main spread compressed to 20.12bps from 21.83bps, but remains above the short-term average of 19.47bps, with the IG/Main ratio falling to 1.16x, below its 5-day mean of 1.16x.

In the US, non-financials outperformed financials as IG ExFINLs are wider by 5.2bps to 123.4bps, with 10 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index rose 4.63bps to 171.73bps, with Banks (worst) wider by 8.46bps to 230.51bps, Brokers (best) wider by 4.5bps to 199.7bps, and Finance names wider by 19.84bps to 716.3bps. Monolines are trading wider on average by 221.52bps (7.22%) to 2846.69bps.

In IG, FINLs underperformed non-FINLs (4.72% wider to 4.38% wider respectively), with the former (IG FINLs) wider by 15.2bps to 337.9bps, with 0 of the 21 names tighter. The IG CDS market (as per CDX) is 38.4bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (107.83bps), with the bond ETFs outperforming the IG CDS market by around 0.41bps.

In Europe, ITRX Main ex-FINLs (underperforming FINLs) widened 6.75bps to 127.1bps (with ITRX FINLs -trending wider- weaker by 5.29 to 122.25bps) and is currently trading at the wides of the week's range at 100%, between 127.1 to 113.61bps, and is trending wider. Main LoVOL (trend wider) is currently trading at the wides of the week's range at 100.03%, between 86.3 to 75.92bps. ExHVOL outperformed LoVOL as the differential compressed to -1.24bps from 1.69bps, but remains below the short-term average of 2.31bps. The Main exFINLS to IG ExHVOL differential decompressed to 42.03bps from 36.8bps, and remains above the short-term average of 37.3bps.

Commentary compliments of www.creditresearch.com

Index/Intrinsics Changes

CDR LQD 50 NAIG091 +5.66bps to 176.01 (42 wider - 5 tighter <> 20 steeper - 29 flatter).

CDX12 IG +4.75bps to 146.25 ($-0.19 to $98.06) (FV +6.78bps to 157.59) (109 wider - 10 tighter <> 57 steeper - 68 flatter) - Trend Wider.

CDX12 HVOL +15bps to 340 (FV +19.12bps to 396.5) (30 wider - 0 tighter <> 9 steeper - 21 flatter) - Trend Wider.

CDX12 ExHVOL +1.51bps to 85.07 (FV +3.23bps to 89.53) (79 wider - 16 tighter <> 47 steeper - 48 flatter).

CDX11 XO +16bps to 372.7 (FV +17.46bps to 456.96) (31 wider - 3 tighter <> 17 steeper - 17 flatter) - Trend Wider.

CDX12 HY (30% recovery) Px $-0.63 to $81 / +23.5bps to 1085.3 (FV +40.73bps to 926.61) (90 wider - 4 tighter <> 15 steeper - 79 flatter) - Trend Wider.

LCDX12 (65% recovery) Px $-1.3 to $81.1 / +73.43bps to 954.68 - Trend Wider.

MCDX12 +5bps to 205bps. - Trend Wider.

CDR Counterparty Risk Index rose 4.63bps (2.77%) to 171.73bps (14 wider - 0 tighter).

CDR Government Risk Index rose 0.32bps (0.49%) to 67.11bps..

DXY strengthened 0.71% to 80.84.

Oil fell $2.62 to $66.93.

Gold fell $11.55 to $922.5.

VIX increased 3.18pts to 31.17%.

10Y US Treasury yields fell 9.8bps to 3.69%.

S&P500 Futures lost 2.9% to 889.1. Sphere: Related Content

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Spreads were broadly wider in the US as all the indices deteriorated. Indices typically underperformed single-names (as we note some pre-roll activity is holding single-names in while macro players drive indices wider) with skews widening in general as IG underperformed but narrowed the skew, HVOL underperformed but narrowed the skew, ExHVOL outperformed pushing the skew wider, XO's skew increased as the index outperformed, and HY's skew widened as it underperformed (with rumors of another HY list today trying to take advantage of the large skew).

Only 9.6% of names in IG moved more than their historical vol would imply as higher vol names outperformed lower vol names by 0.82% to 1.31%. IG's vol is around 4.38% per 1 day period, which leaves 98 names higher vol and 27 lower vol than the index.

The names having the largest impact on IG are International Lease Finance Corp. (-38.72bps) pushing IG 0.26bps tighter, and CIT Group Inc (+91.55bps) adding 0.49bps to IG. HVOL is more sensitive with International Lease Finance Corp. pushing it 1.16bps tighter, and CIT Group Inc contributing 2.19bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Cisco Systems Inc. (-10bps) pushing the index 0.11bps tighter, and MDC Holdings Inc (+8bps) adding 0.08bps to ExHVOL.

The price of investment grade credit fell 0.1% to around 98.23% of par, while the price of high yield credits fell 1.63% to around 81.25% of par. ABX market prices are higher (improving) by 0.12% of par or in absolute terms, 0.03%. Broadly speaking, CMBX market prices are higher (improving) by 0.6% of par or in absolute terms, 0.19%. Volatility (VIX) is down -1.51pts to 30.03%, with 10Y TSY selling off (yield rising) 13bps to 3.82% and the 2s10s curve steepened by 3.9bps, as the cost of protection on US Treasuries fell 0.75bps to 44.5bps. 2Y swap spreads widened 5.7bps to 49.19bps, as the TED Spread tightened by 1.1bps to 0.44% and Libor-OIS improved 0.7bps to 37.5bps.

The Dollar strengthened with DXY rising 0.6% to 80.653, Oil rising $0.19 to $71.22 (outperforming the dollar as the value of Oil (rebased to the value of gold) rose by 0.92% today (a 0.87% rise in the relative (dollar adjusted) value of a barrel of oil), and Gold dropping $6.09 to $932.78 as the S&P rallies (917.7 0.88%) outperforming IG credits (142.25bps -0.1%) while IG, which opened wider at 144.5bps, outperforms HY credits. IG11 and XOver11 are +1.42bps and -2.5bps respectively while ITRX11 is -0.25bps to 122.25bps.

The majority of credit curves steepened as the vol term structure steepened with VIX/VIXV decreasing implying a more bearish/more volatile short-term outlook (normally indicative of short-term spread decompression expectations).

Dispersion rose +3.9bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion decreasing more than expected today indicating a less systemic and more idiosyncratic narrowing of the distribution of spreads.

Only 38% of IG credits are shifting by more than 3bps and 54% of the CDX universe are also shifting significantly (less than the 5 day average of 57%). The number of names wider than the index decreased by 1 to 45 as the day's range fell to 8.5bps (one-week average 8.92bps), between low bid at 139 and high offer at 147.5 and higher beta credits (1.36%) underperformed lower beta credits (0.71%).

In IG, wideners outpaced tighteners by around 3-to-1, with 75 credits notably wider. By sector, CONS saw 46% names wider, ENRGs 63% names wider, FINLs 48% names wider, INDUs 71% names wider, and TMTs 78% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) outperformed US (IG12 exFINLs) with the former trading at 123bps and the latter at 120.36bps.

Cross Market, we are seeing the HY-XOver spread decompressing to 332.49bps from 270.29bps, but remains above the short-term average of 261.47bps, with the HY/XOver ratio rising to 1.45x, above its 5-day mean of 1.36x. The IG-Main spread decompressed to 20bps from 17.25bps, and remains above the short-term average of 17.88bps, with the IG/Main ratio rising to 1.16x, above its 5-day mean of 1.16x.

In the US, non-financials underperformed financials as IG ExFINLs are wider by 1.5bps to 120.4bps, with 20 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index rose 0.74bps to 170.03bps, with Brokers (worst) wider by 3.44bps to 198.01bps, Finance names (best) tighter by 10.23bps to 701.32bps, and Banks wider by 1.46bps to 225.65bps. Monolines are trading wider on average by 35.78bps (1.52%) to 2583.34bps.

In IG, FINLs outperformed non-FINLs (0.92% wider to 1.3% wider respectively), with the former (IG FINLs) wider by 3bps to 325.1bps, with 7 of the 21 names tighter. The IG CDS market (as per CDX) is 38.9bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (103.35bps), with the bond ETFs outperforming the IG CDS market by around 4.67bps.

In Europe, ITRX Main ex-FINLs (underperforming FINLs) rallied 0.13bps to 123bps (with ITRX FINLs -trending wider- better by 0.75 to 119.25bps) and is currently trading at the wides of the week's range at 99.16%, between 123.13 to 107.6bps, and is trending wider. Main LoVOL (trend wider) is currently trading at the wides of the week's range at 99.98%, between 82.7 to 71.04bps. ExHVOL underperformed LoVOL as the differential decompressed to 2.47bps from 1.86bps, but remains below the short-term average of 3.33bps. The Main exFINLS to IG ExHVOL differential compressed to 37.83bps from 38.72bps, but remains above the short-term average of 35.1bps.

Commentary compliments of www.creditresearch.com

Index/Intrinsics Changes

CDR LQD 50 NAIG091 +0.87bps to 170.39 (29 wider - 13 tighter <> 29 steeper - 20 flatter).

CDX12 IG +2.5bps to 142.25 ($-0.1 to $98.23) (FV +1.77bps to 153.1) (75 wider - 27 tighter <> 68 steeper - 57 flatter) - Trend Wider.

CDX12 HVOL +8bps to 323 (FV +4.65bps to 381) (18 wider - 8 tighter <> 17 steeper - 13 flatter) - Trend Wider.

CDX12 ExHVOL +0.76bps to 85.17 (FV +0.96bps to 87.75) (57 wider - 38 tighter <> 44 steeper - 51 flatter).

CDX11 XO +2.8bps to 351.4 (FV +6.23bps to 439.23) (25 wider - 6 tighter <> 10 steeper - 23 flatter) - Trend Wider.

CDX12 HY (30% recovery) Px $-1.63 to $81.25 / +59.7bps to 1078 (FV +28.12bps to 879.34) (77 wider - 12 tighter <> 27 steeper - 64 flatter) - Trend Wider.

LCDX12 (65% recovery) Px $-0.65 to $82.97 / +33.28bps to 851.49 - Trend Wider.

MCDX12 +5bps to 195bps. - Trend Wider.

CDR Counterparty Risk Index rose 0.74bps (0.44%) to 170.03bps (9 wider - 5 tighter).

CDR Government Risk Index rose 0.4bps (0.59%) to 68.18bps.

DXY strengthened 0.6% to 80.65.

Oil rose $0.19 to $71.22.

Gold fell $6.09 to $932.78.

VIX fell 1.51pts to 30.03%.

10Y US Treasury yields rose 13bps to 3.82%.

S&P500 Futures gained 0.88% to 917.7. Sphere: Related Content

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Spreads were broadly wider in the US as all the indices deteriorated (with HY once again underperforming IG but the latter ending well off its wides of the day). Indices generally outperformed intrinsics (as single-names played catch up with last night's weak close) with skews widening in general as IG's skew decompressed as the index beat intrinsics, HVOL outperformed but widened the skew, ExHVOL outperformed pushing the skew wider, XO's skew increased as the index outperformed, and HY outperformed but narrowed the skew (in the face of a lower VIX - maybe OPEX week related).

The names having the largest impact on IG are International Lease Finance Corp. (-4.39bps) pushing IG 0.03bps tighter, and CIT Group Inc (+105.29bps) adding 0.58bps to IG. HVOL is more sensitive with International Lease Finance Corp. pushing it 0.13bps tighter, and CIT Group Inc contributing 2.57bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Allstate Corp (-2bps) pushing the index 0.02bps tighter, and Southwest Airlines Co. (+18.75bps) adding 0.19bps to ExHVOL.

The price of investment grade credit fell 0.13% to around 98.28% of par, while the price of high yield credits fell 1.005% to around 82.88% of par. ABX market prices are lower by 0.13% of par or in absolute terms, 0.59%. Broadly speaking, CMBX market prices are lower by 0.01% of par or in absolute terms, 0%. Volatility (VIX) is down -1.19pts to 31.49%, with 10Y TSY selling off (yield rising) 1.2bps to 3.67% and the 2s10s curve steepened by 4.4bps, as the cost of protection on US Treasuries fell 1bps to 45.5bps (outperforming the other SOV majors on AAA affirmation). 2Y swap spreads widened 1.9bps to 43.69bps, as the TED Spread tightened by 0.7bps to 0.44% and Libor-OIS improved 1.1bps to 38.4bps.

The Dollar weakened with DXY falling 0.6% to 80.225, Oil rising $0.41 to $70.88 (underperforming the dollar as the value of Oil (rebased to the value of gold) rose by 0.04% today (a 0.02% drop in the relative (dollar adjusted) value of a barrel of oil), and Gold increasing $5.05 to $939.85 as the S&P is down (910.3 -0.19%) underperforming IG credits (140.75bps -0.13%) while IG, which opened wider at 138.5bps, outperforms HY credits. IG11 and XOver11 are +3.25bps and +16.5bps respectively while ITRX11 is +5.37bps to 122.25bps.

The majority of credit curves steepened as the vol term structure steepened with VIX/VIXV decreasing implying a more bearish/more volatile short-term outlook (normally indicative of short-term spread decompression expectations).

Dispersion rose 8.5bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion decreasing more than expected today indicating a less systemic and more idiosyncratic narrowing of the distribution of spreads.

61% of IG credits are shifting by more than 3bps and 68% of the CDX universe are also shifting significantly (more than the 5 day average of 55%). The number of names wider than the index increased by 2 to 46 as the day's range fell to 10.5bps (one-week average 8.92bps), between low bid at 136 and high offer at 146.5 and higher beta credits (4.58%) underperformed lower beta credits (4.11%).

In IG, wideners outpaced tighteners by around 12-to-1, with 111 credits notably wider. By sector, CONS saw 92% names wider, ENRGs 88% names wider, FINLs 81% names wider, INDUs 93% names wider, and TMTs 87% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) underperformed US (IG12 exFINLs) with the former trading at 122.81bps and the latter at 119.48bps.

Cross Market, we are seeing the HY-XOver spread decompressing to 267.62bps from 248.64bps, and remains above the short-term average of 252.07bps, with the HY/XOver ratio rising to 1.36x, below its 5-day mean of 1.36x. The IG-Main spread compressed to 18.5bps from 20.62bps, but remains above the short-term average of 18.05bps, with the IG/Main ratio falling to 1.15x, below its 5-day mean of 1.16x.

In the US, non-financials underperformed financials as IG ExFINLs are wider by 5.1bps to 119.5bps, with 5 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index rose 4.7bps to 168.51bps, with Finance names (worst) wider by 34.98bps to 707.43bps, Brokers (best) wider by 1.88bps to 194.7bps, and Banks wider by 6.46bps to 221.33bps. Monolines are trading wider on average by 147.46bps (5.04%) to 2564.44bps.

In IG, FINLs outperformed non-FINLs (3.52% wider to 4.46% wider respectively), with the former (IG FINLs) wider by 10.9bps to 320.7bps, with 4 of the 21 names tighter. The IG CDS market (as per CDX) is 35.2bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (105.52bps), with the bond ETFs outperforming the IG CDS market by around 4bps.

In Europe, ITRX Main ex-FINLs (underperforming FINLs) widened 5.42bps to 122.81bps (with ITRX FINLs -trending wider- weaker by 5.14 to 120bps) and is currently trading at the wides of the week's range at 100%, between 122.81 to 105.5bps, and is trending wider. Main LoVOL (trend wider) is currently trading at the wides of the week's range at 100.03%, between 82.22 to 68.54bps. ExHVOL outperformed LoVOL as the differential compressed to 3.5bps from 7.08bps, and remains below the short-term average of 4.18bps. The Main exFINLS to IG ExHVOL differential decompressed to 37.09bps from 32.78bps, and remains above the short-term average of 33.69bps.

Commentary compliments of www.creditresearch.com

Index/Intrinsics Changes

CDR LQD 50 NAIG091 +5.12bps to 169.09 (42 wider - 3 tighter <> 33 steeper - 16 flatter).

CDX12 IG +2.5bps to 140 ($-0.1 to $98.32) (FV +6.13bps to 151.79) (109 wider - 7 tighter <> 82 steeper - 43 flatter) - Trend Wider.

CDX12 HVOL +10bps to 315 (FV +15.52bps to 375.92) (29 wider - 1 tighter <> 18 steeper - 12 flatter) - Trend Wider.

CDX12 ExHVOL +0.13bps to 84.74 (FV +3.42bps to 87.35) (80 wider - 15 tighter <> 31 steeper - 64 flatter).

CDX11 XO +19.5bps to 353.3 (FV +19.56bps to 437.26) (32 wider - 2 tighter <> 13 steeper - 21 flatter) - Trend Wider.

CDX12 HY (30% recovery) Px $-1.01 to $82.875 / +35.5bps to 1015.6 (FV +59.77bps to 855.72) (94 wider - 1 tighter <> 18 steeper - 77 flatter) - Trend Wider.

LCDX12 (65% recovery) Px $-0.37 to $83.5 / +18.22bps to 817.82 - Trend Wider.

MCDX12 +5.5bps to 189.5bps. - Trend Wider.

CDR Counterparty Risk Index rose 5.4bps (3.29%) to 169.21bps (13 wider - 1 tighter).

CDR Government Risk Index rose 1.26bps (1.9%) to 67.67bps.

DXY weakened 0.6% to 80.23.

Oil rose $0.41 to $70.88.

Gold rose $5.05 to $939.85.

VIX fell 1.14pts to 31.49%.

10Y US Treasury yields rose 1.9bps to 3.68%.

S&P500 Futures lost 0.19% to 910.3. Sphere: Related Content

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Spreads were broadly wider in the US as all the indices deteriorated (as IG underperformed HY and made new June wides). Indices generally outperformed intrinsics with skews mostly narrower as IG underperformed but narrowed the skew, HVOL outperformed but widened the skew, ExHVOL intrinsics beat and narrowed the skew, XO's skew increased as the index outperformed, and HY outperformed but narrowed the skew.

The names having the largest impact on IG are Transocean Ltd. (-4.16bps) pushing IG 0.03bps tighter, and CIT Group Inc (+65.04bps) adding 0.37bps to IG. HVOL is more sensitive with International Lease Finance Corp. pushing it 0.06bps tighter, and CIT Group Inc contributing 1.65bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Transocean Ltd. (-4.16bps) pushing the index 0.04bps tighter, and Valero Energy Corp. (+16bps) adding 0.16bps to ExHVOL.

The price of investment grade credit fell 0.28% to around 98.77% of par, while the price of high yield credits fell 0.25% to around 85.63% of par. ABX market prices are lower by 0.55% of par or in absolute terms, 1.45%. Broadly speaking, CMBX market prices are lower by 0.77% of par or in absolute terms, 0.27%. Volatility (VIX) is up 2.66pts to 30.81%, with 10Y TSY rallying (yield falling) 8.1bps to 3.72% and the 2s10s curve flattened by 4.1bps, as the cost of protection on US Treasuries rose 0.13bps to 45bps. 2Y swap spreads tightened 1.4bps to 40.33bps, as the TED Spread widened by 0.5bps to 0.46% and Libor-OIS improved 1.3bps to 40bps.

The Dollar strengthened with DXY rising 1.23% to 81.128, Oil falling $1.55 to $70.49 (underperforming the dollar as the value of Oil (rebased to the value of gold) fell by 1% today (a 0.92% drop in the relative (dollar adjusted) value of a barrel of oil), and Gold dropping $10.95 to $928.35 as the S&P is down (923.6 -2.23%) underperforming IG credits (129bps -0.28%) while IG, which opened wider at 125.75bps, outperforms HY credits. IG11 and XOver11 are +4.91bps and +33.34bps respectively while ITRX11 is +5.65bps to 113.5bps.

The majority of credit curves flattened (curve steepeners unwinds) as the vol term structure flattened with VIX/VIXV rising implying a more bullish/less volatile short-term outlook (normally indicative of short-term spread compression expectations).

Dispersion rose +4.4bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion decreasing more than expected today indicating a less systemic and more idiosyncratic narrowing of the distribution of spreads.

53% of IG credits are shifting by more than 3bps and 63% of the CDX universe are also shifting significantly (more than the 5 day average of 48%). The number of names wider than the index increased by 2 to 45 as the day's range fell to 6.12bps (one-week average 8.22bps), between low bid at 124.88 and high offer at 131 and higher beta credits (4.51%) underperformed lower beta credits (3.76%).

In IG, wideners outpaced tighteners by around 10-to-1, with 108 credits notably wider. By sector, CONS saw 92% names wider, ENRGs 75% names wider, FINLs 62% names wider, INDUs 96% names wider, and TMTs 96% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) underperformed US (IG12 exFINLs) with the former trading at 113.5bps and the latter at 110.15bps.

Cross Market, we are seeing the HY-XOver spread compressing to 207.7bps from 232.64bps, but remains below the short-term average of 259.04bps, with the HY/XOver ratio falling to 1.29x, below its 5-day mean of 1.38x. The IG-Main spread decompressed to 15.5bps from 14.24bps, but remains below the short-term average of 16.99bps, with the IG/Main ratio rising to 1.14x, below its 5-day mean of 1.16x.

In the US, non-financials underperformed financials as IG ExFINLs are wider by 5.2bps to 110.1bps, with 7 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index rose 8.12bps to 151.33bps, with Banks (worst) wider by 11.68bps to 193.69bps, Finance names (best) wider by 20.71bps to 659.91bps, and Brokers wider by 8.38bps to 176.58bps. Monolines are trading wider on average by 24.99bps (1.2%) to 2309.48bps.

In IG, FINLs outperformed non-FINLs (1.92% wider to 4.96% wider respectively), with the former (IG FINLs) wider by 5.6bps to 296.7bps, with 4 of the 21 names tighter. The IG CDS market (as per CDX) is 28.6bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (100.36bps), with the bond ETFs outperforming the IG CDS market by around 2.5bps.

In Europe, ITRX Main ex-FINLs (outperforming FINLs) widened 5.62bps to 113.5bps (with ITRX FINLs -trending wider- weaker by 5.75 to 113.5bps) and is currently trading at the wides of the week's range at 100%, between 113.5 to 105.5bps, and is trending wider. Main LoVOL (trend wider) is currently trading at the wides of the week's range at 100.01%, between 75.92 to 68.54bps. ExHVOL underperformed LoVOL as the differential decompressed to 1.45bps from -0.65bps, but remains below the short-term average of 3.85bps. The Main exFINLS to IG ExHVOL differential compressed to 36.13bps from 36.22bps, but remains above the short-term average of 32.97bps.

Commentary compliments of www.creditresearch.com

Index/Intrinsics Changes

CDR LQD 50 NAIG091 +5.79bps to 154.48 (46 wider - 3 tighter <> 10 steeper - 39 flatter).

CDX12 IG +6.91bps to 129 ($-0.28 to $98.77) (FV +5.31bps to 140.19) (108 wider - 11 tighter <> 30 steeper - 95 flatter) - No Trend.

CDX12 HVOL +8.22bps to 290 (FV +12.59bps to 344.11) (26 wider - 1 tighter <> 4 steeper - 26 flatter) - Trend Wider.

CDX12 ExHVOL +6.5bps to 78.16 (FV +3.19bps to 80.9) (82 wider - 13 tighter <> 69 steeper - 26 flatter).

CDX11 XO +12.7bps to 325.2 (FV +14.32bps to 407.16) (33 wider - 1 tighter <> 7 steeper - 27 flatter) - No Trend.

CDX12 HY (30% recovery) Px $-0.2 to $85.675 / +6.9bps to 919.7 (FV +32.61bps to 878.36) (87 wider - 6 tighter <> 16 steeper - 79 flatter) - Trend Tighter.

LCDX12 (65% recovery) Px $-0.47 to $84.27 / +21.65bps to 772.43 - Trend Wider.

MCDX12 +0.5bps to 180.5bps. - Trend Wider.

CDR Counterparty Risk Index rose 8.12bps (5.67%) to 151.33bps (14 wider - 0 tighter).

CDR Government Risk Index rose 0.3bps (0.47%) to 64.6bps.

DXY strengthened 1.23% to 81.13.

Oil fell $1.55 to $70.49.

Gold fell $10.95 to $928.35.

VIX increased 2.66pts to 30.81%.

10Y US Treasury yields fell 8.1bps to 3.72%.

S&P500 Futures lost 2.23% to 923.6. Sphere: Related Content

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Spreads were mixed in the US this week with IG worse, HVOL wider, ExHVOL weaker, XO wider, and HY rallying (HY outperformance of IG far greater than XOver compression to Main). Indices typically underperformed single-names with skews mostly narrower as IG underperformed but narrowed the skew (as index curve steepened dramatically relative to intrinsics - we worry that curve/roll trades are becoming overcrowded here - see IG9's short-end!), HVOL underperformed but narrowed the skew, ExHVOL intrinsics beat and narrowed the skew, XO's skew increased as the index outperformed, and HY's skew widened as it underperformed.

The names having the largest impact on IG are International Lease Finance Corp. (-114.44bps) pushing IG 0.76bps tighter, and FirstEnergy Corp (+45bps) adding 0.35bps to IG. HVOL is more sensitive with International Lease Finance Corp. pushing it 3.37bps tighter, and XL Capital Limited contributing 1.15bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Wells Fargo & Company (-16.25bps) pushing the index 0.17bps tighter, and FirstEnergy Corp (+45bps) adding 0.45bps to ExHVOL.

The price of investment grade credit fell 0.07% to around 99.06% of par (as cash dramatically outperformed synthetics on the week driving the basis to almpst zero in IG names), while the price of high yield credits rose 1.505% to around 86.01% of par (basis not nearly as compressed). ABX market prices are lower by 0.75% of par or in absolute terms, 1.88%. Broadly speaking, CMBX market prices are lower by 0.29% of par or in absolute terms, 0.1%. Volatility (VIX) is down 1.47pts to 28.15%, with 10Y TSY rallying (yield falling) 3.6bps to 3.8% and the 2s10s curve flattened by 0.8bps, as the cost of protection on US Treasuries rose 5.28bps to 44.875bps. 2Y swap spreads tightened 7.3bps to 41.75bps, as the TED Spread widened by 0.4bps to 0.46% and Libor-OIS deteriorated 2.6bps to 41.3bps.

The Dollar weakened with DXY falling 0.64% to 80.157, Oil rising $3.76 to $72.2 (outperforming the dollar as the value of Oil (rebased to the value of gold) rose by 7.29% today (a 4.85% rise in the relative (dollar adjusted) value of a barrel of oil), and Gold dropping $15.95 to $939.3 as the S&P rallies (944.7 0.45%) outperforming IG credits (122.09bps -0.07%) while IG, which opened tighter at 126.5bps, underperforms HY credits. IG11 and XOver11 are +3.09bps and +18.05bps respectively while ITRX11 is +6.1bps to 107.85bps.

The majority of credit curves steepened as the vol term structure flattened with VIX/VIXV rising implying a more bullish/less volatile short-term outlook (normally indicative of short-term spread compression expectations).

Dispersion fell -6.2bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion decreasing more than expected today indicating a less systemic and more idiosyncratic narrowing of the distribution of spreads.

50% of IG credits are shifting by more than 3bps and 39% of the CDX universe are also shifting significantly (less than the 5 day average of 46%). The number of names wider than the index decreased by 3 to 43 as the week's range fell to 12bps (one-month average 22bps), between low bid at 117.5 and high offer at 129.5 and higher beta credits (-1.45%) outperformed lower beta credits (-1.29%).

In IG, wideners were outpaced by tighteners by around 2-to-1, with only 41 credits notably wider on the week. By sector, CONS saw 22% names wider, ENRGs 25% names wider, FINLs 33% names wider, INDUs 43% names wider, and TMTs 43% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) underperformed US (IG12 exFINLs) with the former trading at 107.88bps and the latter at 105.14bps.

Cross Market, we are seeing the HY-XOver spread compressing to 229.31bps from 298.57bps, and remains below the short-term average of 274.3bps, with the HY/XOver ratio falling to 1.34x, below its 5-day mean of 1.4x. The IG-Main spread compressed to 14.24bps from 18.38bps, and remains below the short-term average of 17.47bps, with the IG/Main ratio falling to 1.13x, below its 5-day mean of 1.16x.

In the US, non-financials underperformed financials as IG ExFINLs are tighter by 0.7bps to 105.1bps, with 60 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index fell 3.89bps to 143.17bps, with Banks (worst) tighter by 8.04bps to 182.4bps, Brokers (best) tighter by 10.63bps to 168.33bps, and Finance names tighter by 29.9bps to 643.08bps. Monolines are trading tighter on average by -172.33bps (8.13%) to 2292.03bps.

In IG, FINLs outperformed non-FINLs (3.03% tighter to 0.68% tighter respectively), with the former (IG FINLs) tighter by 9.2bps to 292.9bps, with 14 of the 21 names tighter. The IG CDS market (as per CDX) is 26.3bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (95.95bps), with the bond ETFs outperforming the IG CDS market by around 5.01bps.

In Europe, ITRX Main ex-FINLs (outperforming FINLs) widened 6.51bps to 107.88bps (with ITRX FINLs -trading sideways- weaker by 4.48 to 107.75bps) and is currently trading at the wides of the week's range at 100%, between 107.88 to 101.37bps, and is trading sideways. Main LoVOL (sideways trading) is currently trading at the wides of the week's range at 100.02%, between 72.31 to 66.37bps. ExHVOL outperformed LoVOL as the differential compressed to -0.65bps from 4.22bps, but remains below the short-term average of 4.31bps. The Main exFINLS to IG ExHVOL differential decompressed to 36.22bps from 30.78bps, and remains above the short-term average of 32.08bps.

Commentary compliments of www.creditresearch.com

Index/Intrinsics Changes (over the week)

CDR LQD 50 NAIG091 -7.92bps to 148.18 (9 wider - 36 tighter <> 36 steeper - 12 flatter).

CDX12 IG +1.96bps to 122.09 ($-0.07 to $99.06) (FV -2.3bps to 135.14) (43 wider - 74 tighter <> 75 steeper - 49 flatter) - No Trend.

CDX12 HVOL +4.78bps to 281.78 (FV -7.92bps to 331.82) (11 wider - 19 tighter <> 21 steeper - 9 flatter) - No Trend.

CDX12 ExHVOL +1.84bps to 72.43 (FV -0.7bps to 77.79) (32 wider - 63 tighter <> 41 steeper - 54 flatter).

CDX11 XO +0.9bps to 312.5 (FV +2.49bps to 393.58) (17 wider - 16 tighter <> 18 steeper - 16 flatter) - Trend Tighter.

CDX12 HY (30% recovery) Px $+1.5 to $86 / -51bps to 909.7 (FV -60.84bps to 853.87) (30 wider - 67 tighter <> 62 steeper - 35 flatter) - Trend Tighter.

LCDX12 (65% recovery) Px $+0.28 to $84.555 / -12.78bps to 751.73 - Trend Tighter.

MCDX12 +7bps to 177bps. - No Trend.

CDR Counterparty Risk Index fell 3.47bps (-2.36%) to 143.59bps (4 wider - 10 tighter).

CDR Government Risk Index rose 3.32bps (5.45%) to 64.3bps.

DXY weakened 0.64% to 80.16.

Oil rose $3.76 to $72.2.

Gold fell $15.95 to $939.3.

VIX fell 1.47pts to 28.15%.

10Y US Treasury yields fell 3.6bps to 3.8%.

S&P500 Futures gained 0.45% to 944.7. Sphere: Related Content

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Spreads were mixed in the US with IG worse (seeming to set a 120ish support level), HVOL improving, ExHVOL weaker, XO stronger, and HY rallying (seemed like traders followed intrinsics - selling IG and buying HY as IG is rich and HY cheap to intrinsics). Indices typically underperformed single-names with skews mostly narrower as IG underperformed but narrowed the skew, HVOL underperformed but narrowed the skew, ExHVOL's skew widened as it underperformed, XO underperformed but compressed the skew, and HY outperformed but narrowed the skew (and after an outside day yesterday, both IG and HY had inside days - wider tights and tighter wides - tending to signal more volatility to come).

The names having the largest impact on IG are CIT Group Inc (-36.24bps) pushing IG 0.21bps tighter, and Weyerhaeuser Co (+5bps) adding 0.04bps to IG. HVOL is more sensitive with CIT Group Inc pushing it 0.94bps tighter, and Motorola Inc. contributing 0.14bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both FirstEnergy Corp (-16.25bps) pushing the index 0.16bps tighter, and Weyerhaeuser Co (+5bps) adding 0.05bps to ExHVOL.

The price of investment grade credit fell 0.08% to around 98.87% of par, while the price of high yield credits rose 0.37% to around 84.75% of par. ABX market prices are lower by 0.04% of par or in absolute terms, 0.82%. Broadly speaking, CMBX market prices are higher (improving) by 0.01% of par or in absolute terms, 0.02%. Volatility (VIX) is down -0.35pts to 28.11%, with 10Y TSY rallying (yield falling) 9.2bps to 3.86% and the 2s10s curve flattened by 6bps, as the cost of protection on US Treasuries fell 0.07bps to 44.035bps. 2Y swap spreads tightened 1.2bps to 46.25bps, as the TED Spread tightened by 0.7bps to 0.46% and Libor-OIS improved 0.4bps to 40.9bps.

The Dollar weakened with DXY falling 1.02% to 79.51, Oil rising $1.07 to $72.4 (outperforming the dollar as the value of Oil (rebased to the value of gold) rose by 1.51% today (a 0.48% rise in the relative (dollar adjusted) value of a barrel of oil), and Gold dropping $0.07 to $954.42 as the S&P rallies (942.1 0.17%) outperforming IG credits (126.88bps -0.08%) while IG, which opened wider at 125.25bps, underperforms HY credits. IG11 and XOver11 are +1.75bps and +5.85bps respectively while ITRX11 is +2.32bps to 107.57bps.

The majority of credit curves steepened as the vol term structure flattened with VIX/VIXV rising implying a more bullish/less volatile short-term outlook (normally indicative of short-term spread compression expectations).

Dispersion fell -3.2bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion increasing more than expected today indicating a less systemic and more idiosyncratic spread widening/tightening at the tails.

Only 24% of IG credits are shifting by more than 3bps (this is very low!) and 41% of the CDX universe are also shifting significantly (less than the 5 day average of 48%). The number of names wider than the index stayed at 41 as the day's range fell to 8.5bps (one-week average 8.73bps), between low bid at 120.25 and high offer at 128.75 and higher beta credits (-0.92%) outperformed lower beta credits (-0.82%).

In IG, wideners were outpaced by tighteners by around 2-to-1, with 36 credits notably wider. By sector, CONS saw 24% names wider, ENRGs 31% names wider, FINLs 14% names wider, INDUs 46% names wider, and TMTs 26% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) underperformed US (IG12 exFINLs) with the former trading at 107.6bps and the latter at 104.61bps.

Cross Market, we are seeing the HY-XOver spread compressing to 273.28bps from 292bps, and remains below the short-term average of 289.17bps, with the HY/XOver ratio falling to 1.4x, below its 5-day mean of 1.43x. The IG-Main spread compressed to 19.31bps from 19.75bps, but remains above the short-term average of 17.66bps, with the IG/Main ratio falling to 1.18x, above its 5-day mean of 1.17x.

In the US, non-financials underperformed financials as IG ExFINLs are tighter by 0.6bps to 104.6bps, with 54 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index rose 1.07bps to 142.44bps, with Brokers (worst) tighter by 1.25bps to 169.58bps, Finance names (best) tighter by 18.79bps to 635.23bps, and Banks tighter by 2.64bps to 181.97bps. Monolines are trading wider on average by 13.52bps (0.2%) to 2341.07bps.

In IG, FINLs outperformed non-FINLs (1.95% tighter to 0.54% tighter respectively), with the former (IG FINLs) tighter by 5.7bps to 289.7bps, with 16 of the 21 names tighter. The IG CDS market (as per CDX) is 30.9bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (95.95bps), with the bond ETFs underperforming the IG CDS market by around 0.97bps.

In Europe, ITRX Main ex-FINLs (outperforming FINLs) widened 2.1bps to 107.6bps (with ITRX FINLs -trading sideways- weaker by 3.2 to 107.45bps) and is currently trading at the wides of the week's range at 96.74%, between 107.81 to 101.37bps, and is trending wider. Main LoVOL (sideways trading) is currently trading at the wides of the week's range at 99.99%, between 71.04 to 66.37bps. ExHVOL underperformed LoVOL as the differential decompressed to 6.5bps from 5.93bps, but remains above the short-term average of 4.73bps. The Main exFINLS to IG ExHVOL differential compressed to 30.06bps from 31.03bps, but remains below the short-term average of 31.76bps.

Commentary compliments of www.creditresearch.com

Index/Intrinsics Changes

CDR LQD 50 NAIG091 -2.56bps to 147.76 (11 wider - 30 tighter <> 30 steeper - 19 flatter).

CDX12 IG +1.88bps to 126.88 ($-0.08 to $98.87) (FV -1.4bps to 134.37) (36 wider - 70 tighter <> 70 steeper - 55 flatter) - Trend Wider.

CDX12 HVOL -1.88bps to 283.12 (FV -4.46bps to 329.2) (8 wider - 22 tighter <> 18 steeper - 12 flatter) - Trend Wider.

CDX12 ExHVOL +3.07bps to 77.54 (FV -0.5bps to 77.51) (28 wider - 67 tighter <> 43 steeper - 52 flatter).

CDX11 XO -0.9bps to 313.7 (FV -2.38bps to 393.43) (12 wider - 20 tighter <> 20 steeper - 14 flatter) - No Trend.

CDX12 HY (30% recovery) Px $+0.37 to $84.75 / -12.9bps to 953.6 (FV -8.61bps to 856.06) (36 wider - 54 tighter <> 51 steeper - 40 flatter) - Trend Tighter.

LCDX12 (65% recovery) Px $+0.1 to $84.4 / -4.77bps to 768.52 - No Trend.

MCDX12 +5bps to 177bps. - Trend Wider (missed auction in Alabama).

CDR Counterparty Risk Index rose 1.07bps (0.76%) to 142.44bps (11 wider - 3 tighter).

CDR Government Risk Index rose 0.79bps (1.26%) to 63.78bps.

DXY weakened 1.02% to 79.51.

Oil rose $1.07 to $72.4.

Gold fell $0.07 to $954.42.

VIX fell 0.35pts to 28.11%.

10Y US Treasury yields fell 9.2bps to 3.86%.

S&P500 Futures gained 0.17% to 942.1. Sphere: Related Content

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Spreads were broadly wider in the US as all the indices deteriorated (albeit with a wide range day and spreads pushing significantly wider open-to-close). Indices typically underperformed single-names with skews mostly narrower as IG underperformed but narrowed the skew(as we note the cash-cds basis on high-quality credits collapsed this week perhaps putting compression pressure on synthetic spreads as prop desks unwind), HVOL underperformed but narrowed the skew, ExHVOL intrinsics beat and narrowed the skew, XO underperformed but compressed the skew, and HY's skew widened as it underperformed.

The names having the largest impact on IG are American International Group, Inc. (-118.16bps) pushing IG 0.66bps tighter, and FirstEnergy Corp (+33.25bps) adding 0.26bps to IG. HVOL is more sensitive with American International Group, Inc. pushing it 2.9bps tighter, and Carnival Corp. contributing 0.3bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both AT&T Inc. (-10bps) pushing the index 0.1bps tighter, and FirstEnergy Corp (+33.25bps) adding 0.33bps to ExHVOL.

The price of investment grade credit fell 0.08% to around 98.93% of par, while the price of high yield credits fell 0.25% to around 84.38% of par. ABX market prices are lower by 0.06% of par or in absolute terms, 0.41%. Broadly speaking, CMBX market prices are higher (improving) by 0.33% of par or in absolute terms, 0.11%. Volatility (VIX) is up 0.19pts to 28.56%, with 10Y TSY selling off (yield rising) 8.4bps to 3.94% and the 2s10s curve steepened by 3.5bps, as the cost of protection on US Treasuries fell 0.44bps to 42.5bps. 2Y swap spreads tightened 0.8bps to 47.5bps, as the TED Spread tightened by 1.1bps to 0.47% and Libor-OIS improved 0.2bps to 42.3bps.

The Dollar strengthened with DXY rising 0.5% to 80.242, Oil rising $1.19 to $71.2 (outperforming the dollar as the value of Oil (rebased to the value of gold) rose by 1.63% today (a 2.2% rise in the relative (dollar adjusted) value of a barrel of oil), and Gold increasing $0.7 to $955.48 as the S&P is down (938.3 -0.14%) underperforming IG credits (125.5bps -0.08%) while IG, which opened tighter at 119.5bps, outperforms HY credits. IG11 and XOver11 are +0.25bps and -15bps respectively while ITRX11 is -2.5bps to 105.25bps.

The majority of credit curves flattened as the vol term structure flattened with VIX/VIXV rising implying a more bullish/less volatile short-term outlook (normally indicative of short-term spread compression expectations).

Dispersion fell 9.6bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion increasing more than expected today indicating a less systemic and more idiosyncratic spread widening/tightening at the tails.

Only 38% of IG credits are shifting by more than 3bps and 50% of the CDX universe are also shifting significantly (more than the 5 day average of 48%). The number of names wider than the index decreased by 4 to 41 as the day's range rose to 12bps (one-week average 8.23bps), between low bid at 117.5 and high offer at 129.5 and higher beta credits (-0.88%) underperformed lower beta credits (-1.92%).

In IG, wideners were outpaced by tighteners by around 4-to-1, with only 24 credits notably wider. By sector, CONS saw 16% names wider, ENRGs 56% names wider, FINLs 5% names wider, INDUs 14% names wider, and TMTs 17% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) outperformed US (IG12 exFINLs) with the former trading at 105.5bps and the latter at 105.29bps.

Cross Market, we are seeing the HY-XOver spread decompressing to 292.55bps from 268.87bps, but remains below the short-term average of 294.41bps, with the HY/XOver ratio rising to 1.43x, above its 5-day mean of 1.43x. The IG-Main spread decompressed to 20.25bps from 15.75bps, and remains above the short-term average of 16.92bps, with the IG/Main ratio rising to 1.19x, above its 5-day mean of 1.16x.

In the US, non-financials underperformed financials as IG ExFINLs are tighter by 1.1bps to 105.3bps, with 63 of the 104 names tighter, while among US Financials, the CDR Counterparty Risk Index fell 5.26bps to 141.94bps, with Banks (worst) tighter by 4.61bps to 183.83bps, Brokers (best) tighter by 6.38bps to 173.33bps, and Finance names tighter by 21.2bps to 654.08bps. Monolines are trading tighter on average by -156.99bps (6.05%) to 2340.4bps.

In IG, FINLs outperformed non-FINLs (3.24% tighter to 1.02% tighter respectively), with the former (IG FINLs) tighter by 9.9bps to 295bps, with 18 of the 21 names tighter. The IG CDS market (as per CDX) is 32.4bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (93.09bps), with the bond ETFs outperforming the IG CDS market by around 5.67bps.

In Europe, ITRX Main ex-FINLs (underperforming FINLs) rallied 2.31bps to 105.5bps (with ITRX FINLs -trading sideways- better by 3.28 to 104.25bps) and is currently trading in the middle of the week's range at 50.74%, between 109.51 to 101.37bps, and is trading sideways. Main LoVOL (sideways trading) is currently trading in the middle of the week's range at 32.72%, between 73 to 66.37bps. ExHVOL underperformed LoVOL as the differential decompressed to 6.59bps from 4.14bps, but remains above the short-term average of 3.62bps. The Main exFINLS to IG ExHVOL differential compressed to 30.37bps from 32.78bps, but remains below the short-term average of 32.87bps.

Commentary compliments of www.creditresearch.com

Index/Intrinsics Changes

CDR LQD 50 NAIG091 -4.44bps to 150.13 (10 wider - 37 tighter <> 17 steeper - 31 flatter).

CDX12 IG +2bps to 125.5 ($-0.08 to $98.93) (FV -2.68bps to 135.58) (26 wider - 84 tighter <> 38 steeper - 87 flatter) - No Trend.

CDX12 HVOL +8bps to 285 (FV -7.89bps to 333.23) (6 wider - 23 tighter <> 9 steeper - 21 flatter) - No Trend.

CDX12 ExHVOL +0.11bps to 75.13 (FV -1.15bps to 77.91) (20 wider - 75 tighter <> 66 steeper - 29 flatter).

CDX11 XO +3.1bps to 322.5 (FV -4.82bps to 395.74) (5 wider - 25 tighter <> 16 steeper - 17 flatter) - No Trend.

CDX12 HY (30% recovery) Px $-0.25 to $84.38 / +8.7bps to 967.6 (FV -20.07bps to 870.35) (15 wider - 74 tighter <> 54 steeper - 40 flatter) - Trend Tighter.

LCDX12 (65% recovery) Px $-0.4 to $84.3 / +18.88bps to 779.1 - Trend Tighter.

MCDX12 0bps to 172bps. - Trend Tighter.

CDR Counterparty Risk Index fell 5.76bps (-3.91%) to 141.44bps (2 wider - 13 tighter).

CDR Government Risk Index fell 0.84bps (-1.32%) to 62.71bps..

DXY strengthened 0.5% to 80.24.

Oil rose $1.19 to $71.2.

Gold rose $0.7 to $955.48.

VIX increased 0.19pts to 28.56%.

10Y US Treasury yields rose 8.4bps to 3.94%.

S&P500 Futures lost 0.14% to 938.3. Sphere: Related Content

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Friday, June 12, 2009

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