Loans Versus Bonds Relative Value: Week of October 8
Some marginal and long overdue divergence between bonds and loans, with the Sealy negative basis again being the most notable event. Loans tightened by 10 bps to 391 bps, while bonds widened by the same amount to 716 bps. Looking at the weekly comparison chart demonstrates that the bulk of activity is due to general noise, resulting from equity market carryover, while the two actual movers were Cenveo loans wide by 245 and Mediacom, which tightened by 372 bps. At this point expect the credit complex to continue being a derivative of the algo trading dominated equity market which grinds higher on imaginary volume breadth.