Corporate bonds are firmer once again as the march of buyers continues. Trading volumes remain light as many are in year end mode. Participants uniformly report that the flow of business is skewed to the buy side and selling is infrequent.As I mentioned yesterday, some participants expect a heavy slate of issuance as 2008 fades into financial oblivion. One salesman noted that he has clients with a pile of cash and their dream is to invest it as the new issue come to market in January.
That will be an important test for the market and will provide some real world data points to observe if credit market rehabilitation is truly underway.
Here are several examples of the move in spreads on quality corporate bonds.
The Budweiser 2018s issue was trading T + 510 about two weeks ago. That paper is 410 bid today.
IBM has several issues in the 9 year and 10 year part of the curve which before the rally traded T + 370 ish. That paper is mostly 275 bid now.
Con Edison has a 2018 issue which traded at T+ 445 a week ago. That bond is now 385 bid.
There are quality accounts looking for solid investment grade bonds and spreads are marching tighter.
Once again, in the interest of honesty and full disclosure I am long the EFT LQD. I also own some Wells Fargo paper in 2013 and some GE paper in 2012. Very small amounts on each and each is in the Across the Curve hold to maturity portfolio.
I also own some PSY. That is not for the faint of heart. I averaged into that one and I have a tiny profit.