Firms taking advantage of hot credit markets

GE Capital is trying to take advantage of the hot credit markets to get away from the FDIC guarantee program. It sold $2 billion of 10-year notes without the FDIC guarantee. GE still relies heavily on the FDIC program with $50.7 billion of FDIC guaranteed debt outstanding, but it does not want to issue any more. So far GE has sold about $9 billion without the guarantee.

Other issuers came into the bond markets, including Dow Chemical and FirstEnergy. For those looking to raise debt capital, this is the time to do it. As long as mutual fund flows into fixed income funds continue, credit markets are open for business.

Investment grade CDS (see chart below), amazingly enough, has tightened to pre-Lehman levels.

IG CDX


This of course is starting to make market participants really nervous. We've been here before. From Reuters:

U.S. corporate bonds, after rallying nearly nonstop since March, may be poised for a pullback before year end.
...
"I don't think at this point in time there's a lot of reward for the risk you are taking in the corporate bond market in any sector," said Dan Vrabac, portfolio manager for the Ivy Global Bond Fund in Overland Park, Kansas.

But few, however, want to short into this rally - it's hard to stop a freight train.