For most of September, we have been bungling through the jungle of corporate credit. Interest rates in the belly of the curve have risen by about 25 basis points since the end of August, and credit spreads have been leaking wider. The story here is probably more about rates than credit, though. Credit spreads have been following modest weakness in the equity markets, and both have improved this week. The move in interest rates has been much more pronounced, and has mirrored the strength in the dollar.

It doesn’t really feel like an economy where the dollar should be skyrocketing. Housing trends, employment growth, and general economic activity are all on the anemic side. We wouldn’t call them bad, but they certainly aren’t booming. So maybe it isn’t the dollar skyrocketing, maybe things everywhere else are cratering. Europe continues to be weak, putting further pressure on the ECB to take anti-deflationary action. Japan’s strategy of promoting inflation seems to be geared primarily towards weakening the yen. Russia is struggling with economic sanctions brought on by its extracurricular activities in the Ukraine. And finally, we had the British Pound, beaten down by concern over the Scottish Independence vote.

The Scottish question had implications well beyond the Moors, for Northern Ireland, the Basque region & Catalan to name a few. As the Euro still looks shaky in its loose confederation, many countries seem to be asking to what extent independence should be pursued rather than unity. The markets clearly prefer the stability of unity, and hope that the currencies in question have strapped on their aqualungs to survive what they hope will be temporary plunges. It was a new day yesterday, as the No votes prevailed.

Corporate bonds have probably been impacted by the locomotive breath of continued heavy supply, which abated somewhat this week. Total new issue was around $20 billion, led by $2.5 billion from Mizhuho across 4 tranches, $2.0 billion of long and very-long paper from Teachers, as it funds its acquisition of Nuveen, and $1.75 billion from Humana. None of these deals have done all that well, with spreads moving a little wider. Even though the market felt better today, it has not been a great week for credit. It’s just hard to know whether a benign credit environment will continue to prevail, or whether we will find ourselves skating away on the thin ice of a new day.

With apologies to Ian Anderson.