And so, after weeks of bluster around the budget / debt ceiling impasse, something did finally give. No political comments here, but we seem to be right back where we started, with just a little breathing room. Nevertheless, with the possibility of an imminent U.S. default off the table, risk markets reacted favorably, and Credit was among them – the index was tighter by 4-5 basis points. This doesn’t seem fair, in some ways. Equities at least traded lower during the uncertainty, before rebounding to new highs. But cash credit spreads have been tightening all along. Lack of supply, continued strong demand – it feels like a very technical market to me right now, but spreads just keep grinding in.

Financials continued to lead the way, and are now trading through industrials and utilities, which has not been the case since before the financial crisis. This is perhaps a point worth dwelling on. Taking a quick look at the KBW Bank Index and the S&P 500, Banks still clearly trade cheap to the broader market. Not so in credit – financials are giving no indication of stress at all. Nearly five years to the day after Lehman Brothers failed, we just might have to call the financial crisis over. Others may have declared it over long ago, but not us. We credit people hang on to our fear.

As I already mentioned, supply continues to be light – just about $13 billion this week. Wrigley’s was the big deal – a name you may remember was taken private in 2008, another M&A symbol of the pre-crisis era. They have de-levered nicely, and came to market with 5 different 144(a) issues totaling $3 billion. The deal was very well received, and probably would have been even in a crowded market – bonds are trading about 20 basis points tighter. Supply looks like it will continue to be light into next week. What looked on track to be a record-breaking year just might fizzle out into the 4th quarter.