Morning Update

This morning we are again seeing very choppy trade in CDX this morning. Currently, the IG.10 5Y are currently quoted at 212.62 x 213.62, wider by 18.7 bps since yesterday's close. Earlier this morning, we saw spreads quoted around 230bps, wider by around 36 basis points. I am attributing this to the AIG news of downgrades this morning along with the continued stress that the Lehman bankruptcy is placing on the financial markets. Overnight in Asian trading we saw them react to the news and it was not a very good reaction, as banks and brokerages in Asia got hammered to the downside and default spreads widened significantly for the Asian banks based on their exposure to Lehman Brothers. IG HVOL.10 5Y quoted at 493.83 x 495.83 wider by 30.26bps. The only CDX that seems to be quoted tighter this morning is XO.10 5Y's, currently quoted 328 x 332 narrower by 36.43 so far today. Hearing from some in the dealer community that this is caused mostly by dropping any kind of risk (corporate, swap, Agency, whatever) and going to the relative safety of US Treasuries for the time being.