Spreads were tighter in the US as all the indices improved (though were unable to break Friday's tights and closed wider than Thursday's close). IG trades only 8.1bps tight (rich) to its 50d moving average, which is a Z-Score of -0.7s.d. At 105bps, IG has closed tighter on only 8 days so far this year (192 trading days). The last five days have seen IG converging to its 50d moving average.

Most notably from our perspective, ignoring the Yom Kippur quietness, was the flattening of IG curves, IG12-13 decompression, IG9-12 decompression, and HY stoicism in the face of its roll tomorrow. Given the relatively low liquidity (and extremely low volumes in equity land), it is perhaps understandable that month-/quarter-end window-dressing was able to maintain risky assets near period highs in the face of other asset-class divergence.

Indices generally outperformed intrinsics with skews mostly narrower as IG outperformed but narrowed the skew, HVOL underperformed but widened the skew, ExHVOL outperformed but narrowed the skew, XO underperformed but compressed the skew, and HY outperformed but narrowed the skew.

IG13 additions were mixed with JCI and GATX best, RAI and UNH unch, and DTV and KMP wider as we see IG13 trading cheaper to intrinsics than IG12 as intrinsics roll around 10-11bps. HY13 intrinsics trade around 20-30bps wider than HY12 and given HY12's relative cheapness to intrinsics we suspect HY13 might be slightly more appealing for shorts (if pressure holds the skew narrower), but this one will be worth watching from the open.

IG and HY both closed wider than their Thursday closes whereas SPY closed above last Wednesday's close and we wonder with the relative dullness this afternoon and outperformance of stocks whether we will see a 'told-you-so-dance' moment as equities stall back to dollar/TSY-implied levels as the window-dressing period is increasingly gamed earlier and earlier. We cant help but think a short 7.8x UUP vs short 1xSPY trade will converge nicely in the short-term.

The names having the largest impact on IG are XL Capital Limited (-10bps) pushing IG 0.08bps tighter, and CIT Group Inc (+30.04bps) adding 0.14bps to IG. HVOL is more sensitive with XL Capital Limited pushing it 0.37bps tighter, and CIT Group Inc contributing 0.6bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Textron Financial Corp (-9.5bps) pushing the index 0.1bps tighter, and Alcoa Inc. (+5bps) adding 0.05bps to ExHVOL.

The price of investment grade credit rose 0.15% to around 99.79% of par, while the price of high yield credits rose 0.43% to around 94.81% of par. ABX market prices are higher (improving) by 0.07% of par or in absolute terms, 0.14%. Broadly speaking, CMBX market prices are higher (improving) by 0% of par or in absolute terms, 0%.