Credit Indicators Better Wednesday

Most of the important gauges of the credit markets were very stable on Tuesday. In fact, in some cases there were large improvements in conditions.

For example, the corporate calendar was very heavy on the day and included upsized deals.

Second, the LCDX index on credit default swaps for single-name loans closed at a yield spread of 247.9 basis points compared to +257.5 basis points on Tuesday.

Third, the 10-year swap rate fell 3.25 basis points to 70.75 basis points over Treasuries, a sign that entities with debt obligations were more interested in holding their floating-rate obligations than in swapping into fixed-rate obligations.

Fourth, the short-end of the Treasury yield curve was weak, indicating reduced expectations for Fed rate cuts, now deemed to be more questionable as a result of what appear to be more stable conditions.

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Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market, first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.

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