The tone in the market felt decent this morning until rating agency Moody's dropped a ratings bomb on Portugal cutting the sovereign to sub investment grade.

Over the long weekend, rating agency S&P dropped its own bomb by opining that a restructuring / rollover of Greek debt could constitute a default.

Stocks recovered off their lows to close relatively flat but corporate credit traded weak with spreads for banks and financials particularly soft (weak) into the close.

Treasury bonds caught a bid in a classic flight to recovery with the yield on the 10 year closing at 3.12% and the yield on the 5 year closing at 1.68%.

Yields could fall further in the near term as the Greece / Portugal situation remains uncertain (price and yield move in opposite directions).

In the long term, however, this player would expect yields to steadily increase as the macroeconomic backdrop gradually improves in the U.S.

This Friday's payroll numbers should actually beat expectations and corporate earnings which kick off next week should help improve sentiment further.

On an interesting note, this player was asked whether or not some of the larger broker / dealers helped to "facilitate" the two / three day rally before quarter-end last week.

Considering that the larger broker / dealers still hold substantial bond positions in inventory, a late rally just before quarter-end (on very little actual trading) could mean that results for financials come out better than they otherwise would have.

Oil prices continue to increase, closing above $97 a barrel.

With interest rates as low as they are and the market tone somewhat steady today, corporate issuers rushed to issue bonds.

From an issuer's perspective, there is always the danger that market volatility could come back (volatility is not good for bond new issues).

In new issues, Swedish bank Svenska Handelsbanken sold $1.25 billion of 5 year debt at +145 (spread over Treasury).

Aerospace / defense giant General Dynamics sold $1.5 billion of debt in a three-part multi-tenor offering: $500 million 3.5 year debt at +68, $500 million 5 year bonds at +60, and $500 million 10 year debt at +78.

Oil exploration company Devon Energy sold a total of $2.25 billion in bonds: $500 million 5 year at +77, $500 million 10 year at +97, and $1.25 billion of 30 year bonds at +127.

In the sovereign space, the Republic of Colombia sold $2 billion 10 year bonds at +130.

Colombia should trade well in secondary markets as players look to diversify away from Europe.