Fixed Income Recap

Treasuries
In bond land the flight to safety trade continues to dominate the market. Longer treasuries outperformed the short end today as the curve flattened about 10 basis points to 247.

MBS
Mortgages were relatively flat throughout the day, widening out slightly against treasuries. Capital strapped balance sheets of companies like Citigroup, who today announced a goal of reducing its workforce by 50,000 workers or 15%, appear to be the main culprit.

Credit
Junk credit, as measured by the Markit CDX IG11 credit derivatives index, struggles to find a bottom as sellers struggle to match up with buyers even at these newfound lows.

Where is TARP?
TARP money, which seems to be going in every direction other than where it was originally intended to go, remains in limbo. How many times did we hear Paulson pleading with congress and taxpayers to support a plan for him rescue of the market? “The plan we have designed must be funded and enacted now.”, Paulson continued to say. Not only is his plan not in effect right now, despite being more than adequately funded, but the formal plans for the funds has done a complete 180. Even better, ideas are being floated for part of the remaining Troubled Asset Relief Program funds to be given to the struggling automakers to keep their ailing businesses afloat. In my eyes, Paulson, along with Pelosi and the rest of Capitol Hill, earn little trust with their indecisiveness. Regardless, a report released today by the Treasury claims the current administration will abandon efforts to employ the rest of the $700 billion and leave it for the Obama administration.


Cliff J. Reynolds Jr.
Junior Analyst