We've been saying for quite some time that the various government programs have broken the credit markets in a way that make them useless for telling whether or not the economy is recovering.
Floyd Norris from the NY Times says:
But that glance is deceiving. Corporate bond markets around the world are functioning in large part because of government guarantees. Eight months ago, before the collapse of Lehman Brothers and the rescue of the American International Group, the idea of a government-guaranteed corporate bond would have seemed contrary to basic capitalist principles. Now, such bonds account for a substantial share of corporate bond issuance, generally by banks and other financial companies.
Now that everybody has that story, let's check real life in junk bond land. From the WSJ:
Risk Appetite Returns for Junk Bonds
Junk-bond investors snapped up nearly $4 billion of new issuance this week and pushed prices higher when the bonds traded, marking one of the best weeks in this market since last year.
This is the most raised in one week since June 2008, according to data provider Dealogic..Seagate wasn't alone tapping the market this week. There were two billion-dollar deals that came Wednesday, the first deals of that size in more than six months. At the same time, valuations in general have been moving higher.
The only viewpoint that matters is the last one. If things are improving in junk bond land, they are improving everywhere.
Ignore the muckrakers that proclaim things are still dark because they can't find the light switch in a darkened room!
Maybe they just need some glow in the dark stars on the ceiling to guide them.
But then, they would need to be looking up!