Keeping a Modest Overweight

- Long double-dip risk — "In August, markets responded negatively to the slide in the US data. Yet our economists continue to believe that double dip concerns are overstated. Near-term European peripheral liquidity fears also seem overdone."
- Keeping a modest overweight — "Investors show strong appetite for risk. However, risks remain from the sheer size of the pipeline, elevated sovereign spreads, and potential downward 3Q earnings revisions. With these in mind, stay only modestly overweight."
- Bonds over CDS — "Bonds are the cheapest they have been to CDS since January. While CDS spreads are priced to perfection, cash still has a lot of catching up to do. We favor index and single-name CDS hedges."
- BBBs yet again — "Resurfacing of M&A activity argues in favor of buying cheap lower-rated non-financials with healthy balance sheets, which could become attractive acquisition targets."
- TruPS — "Comerica and City National called their hybrids, justifying our preference for yieldy TruPS - especially those trading at a discount."
- Premium bonds — "Not only do they trade cheap to low-dollar bonds, but also could be taken out in favor of issuing low-coupon debt."


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