Corporate bond flows continue to see net-selling in the major financials (such as GS, C, JPM, AXP, MS, and BAC) with MS volume huge. C specifically is seeing a lot of dealer-to-dealer volume. At the same time, CDS are limping sideways to modestly tighter and we note that while financial stocks are holding up from yesterday's incredulity, they are not joining the rest of the high beta sectors. Hardly the positive underlying factor this market seems to be rallying on? Financials remain in the red from Friday and we also note that IG and HY credit and making lower highs as equities make higher highs - especially HY which given its cheapness should be bid if risk appetite is truly there.
Sectoral performance since Friday's close.
UPDATE: It appears that there is a significant Morgan Stanley basis trade unwind the last couple of days - perhaps that is why we are seeing net-selling in bonds and modest CDS compression:
Looks like it was a great trade but large crowds and small doors...