SNAFU

In the financial markets there is nothing really new. Some vaguely good news:

• The ABCP market has expanded a little, for the first time since August 2007;
  
• The 3m swap spread has come in a little; and
  
• Despite all the talk, a major monoline has not yet defaulted or even lost its AAA.
  

Meanwhile the realignment is continuing:

• The VIX is up;
  
• Shares are broadly down although they are still bizarrely high compared with bond spreads;
  
• Corporate defaults are expected to rise according to Citi and JPM and the iTraxx is a little wider;
  
• The rerating and downgrading of CDO tranches continues; and
  
• The tightening of the ABX over Christmas was temporary.