The corporate bond new issue machine continued to steam ahead with today's volumes eclipsing yesterday's heavy issuance.

Even with stocks in the red (housing start numbers were not great), corporate bond spreads held in relatively steady in a testament to the amount of cash that real-money investors are sitting on.

There was noise out of Europe this morning with cash bonds for Spain trading particularly heavy.

Sovereign CDS (credit default swap) spreads for the peripheral European complex are closing 15-20 basis points wider; a solution to Europe's sovereign woes remains elusive.

Treasury bonds continue to rally in a short-squeeze (the ultimate pain trade for some West coast players) marked by illiquidity.

The yield on the 5 year Treasury bond breached the 1.8% threshold and the 10 year is fast approaching 3%...

If treasury bonds continue to rally, corporate credit spreads may lose support from real-money players.

Already we're seeing the duration-effect take full hold in the corporate bond markets.

Recent 10yr new issues have been trading heavy in secondary trading.

The recent CVS 10yr, GPS 10yr, BAC 10yr and most recently the new Google 10yr.

Google happens to be one of the most cash-rich companies in the world but players want to no part of 10yr risk, with or without the cash cushion.

You heard it first in Market Color...3yr is the new 10yr.

In a bid to take advantage of record-low interest rates and catch the markets before the post-Memorial day summer lull, issuers continue to press ahead.

HSBC tapped the markets with a $3 billion bond issue: $1.5 billion of 5 year bonds at +133 and $1.5 billion of 2 year FRNs (floating rate notes) at +43.

Health care company Aetna sold $500 million of 10 year bonds at +118; this 10 year should trade very well in secondary trading on simple supply-and-demand. There was heavy involvement in the deal by real-money insurance players.

Transportation concern Ryder sold $350 million of 6 year debt at +175.

Dutch bank Rabobank sold $1.5 billion of 30 year debt at +115.

McDonald's sold $400 million of 10 year bonds at +58.

Medical products maker Johnson & Johnson took the cake issuing a total of $3.75 billion of debt in a multi-part, multi-tenor offering.

It's a quiet economic calendar tomorrow; market technicals should preside.