The sell-off in the credit markets following the Japan crisis was fairly orderly last week.
The timing of the PIMCO manager's move out of Treasuries so many months before the Fed is scheduled to end its bond purchase program strikes us as odd.
The corporate bond market continued to be a beneficiary of the sell-off in the municipal bond market, but this trend could end soon.
Aside from Illinois' new issue, there were encouraging signs last week in the new issue market for traditional municipal bonds.
A number of technical factors in the municipal bond market have magnified the selling pressure.
While we still have a long way to tighten before we get to the historically tight spread levels before the credit crisis, we are starting to see developments that concern us.
As commodity prices skyrocket around the world, interest rates have been steadily rising.
The turmoil in the municipal bond market is forcing muni bond portfolio managers to sell what they can, not what they want to.
The weak economic environment has made M&A an appealing way to 'purchase' growth through bolt-on acquisitions, while some sectors are still suffering from overcapacity, making the build versus buy decision tilt to the latter.
European banks find U.S. market more receptive and with cheaper financing than the European fixed-income market.
While we continue to expect credit spreads to tighten over the course of the year, we expect the pace to slow dramatically.
A change in focus toward shareholder-friendly activity in 2011 will cause issuer-specific credit widening to the detriment of some bondholders.
Credit spreads have now recaptured one half of the spread widening because of the most recent sovereign crisis.
Rising inflation expectations and concern that the U.S. government is still not serious about cutting the deficit hit Treasury prices last week.
Each succeeding bailout entangles the global financial system even further.
Without additional structural reform among troubled governmental entities, we expect only a brief respite before the next crisis.
European corporate bond spreads widened 10 basis points last week, with an even greater weakening in the financial sector.
Over the near term, we expect credit spreads to continue to tighten, but longer term, we see possible unintended consequences from the Fed's recent actions.
Whatever form this next round of liquidity enhancement may take, it is sure to cause significant volatility this week.
Investors reduce financial holdings as they re-evaluate risks associated with mortgage scandals, while industrials were well bid following strong earnings reports.
In the quest for absolute yield, individual investors have been increasingly reaching down the credit-quality spectrum.
Investors should pay attention to bond covenants as buyout activity heats up.
Instituting another round of quantitative easing at this point will only be pushing on a string and could have many unintended consequences.
Would the real economy please stand up?
Credit spreads are still relatively wide compared to long-term averages and our expectations for further credit metric improvements.
Just as the credit market was starting to lose momentum, along came the tech sector.
But the story and headline risk out of Europe isn't over.
Credit spreads have been in flux as economic news swings from negative to positive.
Despite investors' efforts to push the markets higher, equity mutual funds, once again, experienced redemptions, while money continued to pour into fixed income.
Credit spreads for nonfinancial issuers (especially those in defensive sectors) held up better last week than financials, which widened significantly versus the rest of the market.
Pricing pressures have expanded from commodity-oriented products to segments that typically exhibit greater brand loyalty.
Greater access to short-term funding and additional liquidity among financial counterparties will be the true testament as to the validity and credibility of the stress tests.
The credibility (or lack thereof) of this week's results is the next major event that will affect the global credit markets.
Weaker-than-expected economic indicators in June led to widening corporate bond spreads, reflecting a dislocation in the markets.
While sovereign issues have slipped from the front page to the back of the newspaper, we continue to have worries about several issues.
Issuers will probably look to use recent stability to price bonds before the new issue market begins to slow later this month in anticipation of the July 4 holiday.
Tone remains cautious as investors weigh political and economic risks and dealers have been paring holdings.
How many sovereign defaults could occur before financial Armageddon?
The ongoing crisis in sovereign risk has highlighted the differences between investing in corporate and government bonds.