The morning opened with stocks in positive territory and corporate credit spreads a couple of basis points tighter.

By the close, the markets slid lower with the S&P stock index down -1.6% and corporate credit spreads 4 bps wider off their morning tights.

Treasury bonds rallied in a classic flight-to-quality even as Fed Chairman Bernanke talked about the possibility of near-term inflation as oil closed above $100 a barrel.

Gold closed at an all-time record of $1,431 an ounce.

The stalemate between Colonel Qaddafi and the people of Libya continues.

Talk of military intervention may have unintended consequences; rightly or wrongly, the Libyan people will view foreign boots-on-the-ground as a grab for oil.

While chatter of unrest in Iran, Oman, and Bahrain preoccupied the markets, the potential for real unrest lies in non-energy rich countries like Yemen and Morocco, pressured by demographics and economic malaise.

In new issues, volumes were relatively light on account of the afternoon market volatility.

This morning, French mortgage bank Compagnie de Financement Foncier (part of the Natixis family) sold $1.5 billion of 3 year covered bonds at a spread of +111 (asset-swap spread of +85).

In sovereigns, the Republic of South Africa sold $750 million of 30 year debt.

The Fed's beige book is out tomorrow.