Spreads widened in general today in the face of a surprisingly resilient US equity market as overnight saw more Asian angst and dollar doldrums. HY underperformed IG but both were wider as indices underperformed intrinsics and low beta underperformed high beta. Intraday ranges were wider than average in IG and HY today but both closed much nearer their wides than tights, as stocks closed at their highs. HY's resilience yesterday (following the AXL debacle) seems to have run its course with both IG and HY now wider on the week. IG and HY are both significantly wider than their Friday closes and Monday opens whereas the S&P seems modestly worse than Friday's close but considerably better than Monday's open - infer what you will.

China, the dollar, and Crude were the talk of the day and the spin-meisters were out en masse to use these changes to their own evil needs. Sorry, sarcasm off for a moment. Chinese equities are seemingly going through what can only be a natural pullback (if not greater sell-off) after their 100% plus run-up this year. The tightening of the easy credit which appears to have stoked the home fires of speculation are providing the same downside thrust as we experienced over here and the SHCOMP sits at some interesting technical support levels.

The dollar was fascinating today as it appeared much of its weakness was due to a major sell-off against the Swissy. Makes you wonder what the quid pro quo was on the 'deal' between the IRS and Swiss government to get down from 55000 accounts to 4500? The DXY dropped providing just the right amount of risk appetite barometer (see last night's comments for our dollar thoughts) for stocks to surge off a weak open and then again mid-morning (post a smaller than normal POMO) as oil prices surged above $70.

A lot was made of inventory drops and contango and storage but we find it somewhat comical that only the minority noticed the expiry-based squeeze that we see all too often. Looking at non-commercial (speculative) longs vs shorts and previous expiry cycles recently, it seems clear that rolling their contracts into the forward months is dragging current month up and that this is much less fundamental than technical. Nevertheless, it was enough to get the front month up to almost 2009 highs.

The oil strength (and dollar weakness against the EUR and CHF) was enough to help the Scandis who all surged today, adding to the euphoria in stocks and helping rally us up to the highs of the day in SPY by the close. (Can you hear our incredulity here).

Credit markets did rally off opening gap wides but remained wider than last night's close all day and did not partake of the late day insanity in stock land and the after-hours ramp in SPY as news broke of BBVA's winning bid for Guaranty (making us wonder just what backstops the FDIC offered).

Wideners outpaced tighteners by 5-to-2 today in credit markets as IG saw its skew compress modestly while HY skews widened a bit. This latter skew (HY that is) has had some serious implications on the lesser liquid names in the HY index recently. Two that stand out are CHK and FST which have legged significantly wider (and DTCC data shows on much higher than average derisking) as we sense the technical index arb players have pushed enough volume to gap dealers risk higher in names that really trade very infrequently. If we were betting men (which thank the lord we are not sir), we would venture a long in FST or CHK and perhaps look to take advantage of an illiquid position to sell FST protection against buying CHK protection which despite our model's seems like an empirically sound risk weighting.

US financials pushed wider once again today (catching up with their European rivals) as ITRX FINLs senior-sub continues to decompress (thanks in part to delay of payment on Northern Rock's sub debt). Sovereign risk rose also as the dollar weakened with USA underperforming. Aussie credit was modestly better overnight but Asia was wider with banks underperforming.

With Tishman defaulting on some debt and CRE loan loss rates rising rapidly, builders along with REITs and the ABX/CMBX markets saw selling pressure in credit land. All builders were wider (much more mixed in equities) as VNO and BXP leaked wider.