credit spreads tighter

credit spreads continue to tighten today, as evidenced by the yield spread between fnm's 10-year notes and 10-year treasuries, which today is at 62.5 basis points, down 5.3 basis points on the day and well below the peak of 97.7 basis points on 3/14. the 10-year swap spread is down 0.5 basis points to 61.5 basis points - this is higher than last week's low of 59.8 basis points (on wednesday), but still much lower than the recent peak of 91.3 basis points (on 3/6/08). moreover, in the context of the 15-basis-point rise in the yield on 10-year treasuries, the steadiness in swap rates at lower levels is encouraging.

large declines in swap spreads that occurred the past two times in 8/07 and 11/07 coincided with increases of about 1,000 points in the djia, an idea that has been largely fulfilled yet again. as for corporate bonds, data at thursday's close indicate that Baa-rated corporate bonds yielded 6.76%, down 6 basis points on the day and 23 basis points below the 3/11/08 peak.