Liquidity Fears Evaporate

The credit markets likewise eased up Wednesday. A robust reopening of the high-grade corporate credit market after a long dry spell also supported the theory that liquidity is still plentiful enough to avoid crisis.

Wall Street's corporate bond syndicate desks spent the afternoon pricing 10 investment grade bond offerings Wednesday as the window of opportunity opened after a nearly monthlong period of stillness. But despite a good day of dealmaking, many credit market participants remain cautious about the outlook.

"Plenty of companies need to borrow and seem prepared to do so --- but deals will complete largely on buyers' terms," says Edward Marrinan, head of investment grade fixed-income strategy at JPMorgan Chase. ""There is no escaping the fact that the credit markets still have to contend with a full pipeline of committed but unsyndicated financing facilities related to LBOs and other leveraged loan transactions. The completion of these deals looms as a major challenge for the market."

The deal flow Wednesday will make for the strongest issuance week in the high-grade credit market since the week ending July 13, when $18 billion was priced. Wednesday's deals alone included offerings of $1 billion or greater from Merrill Lynch (MER - Cramer's Take - Stockpickr), Citigroup (C - Cramer's Take - Stockpickr) and Kraft (KFT - Cramer's Take - Stockpickr).

Investors say the deals are coming with some concessions, or higher yields than in the pre-credit crunch days. They are being offered to buyers by the undewriters anywhere from 5 to 15 basis points above comparable issues in the marketplace.