Guest Post: Stocks And Credit In Full Disconnect Mode

From Peter Tchir of TF Market Advisors

IG16 is 129.5, 3 bps wider.  MAIN is 170 +5.  XOVER 720 +22.5  (this was 580 last week at the tightest level).  SOVX is 308 +10 and Fins (an index of European financials) is at 260 +10 and the version referencing sub debt is 458 +21.  BAC is getting close to 400. 

Not only are all the spreads wider, the bid/offer is abysmal. The market has lost any semblance of provding true liquidity.  It is broken enough that it wouldn't take much volume to push the indices tighter, but on the other hand it is hard to figure out why stocks are heading higher, so obliviously.

It is not only the CDS market that is struggling.  The cash bond market is at a virtual standstill.  Bids for bonds have dropped and so far, sellers haven't yet given up hope and hit the much lowered bids, but it doesn't feel like it would take much for that to happen as the market is teetering.

It is interesting how many investors talk about credit leading the markets, but choose to ignore it when they see it.

Maybe the 10 am economic releases will help the market?  Personally I find that hard to believe.  Has it really come down to the point that Bernanke is carrying the entire investment world on his shoulders?  Scary thought.