It was another day of interesting price action in the markets with stocks closing in the red despite an early attempt at a rally.

Corporate credit spreads, particularly long dated financial bonds, were surprisingly resilient despite the sell-off in stocks.

There was a large real-money investor buying up chunky blocks of cash bonds ahead of month-end (which is on Friday).

With a U.S. debt ceiling deal ever elusive and the technical bid for bonds from real-money players likely to dry up, we can expect to see some very sharp widening in credit spreads over the next couple of trading days.

Spreads on financial bonds are trading 20-40 basis points tighter compared to the wide prints of almost a year ago yet the overall macroeconomic backdrop is more precarious today than it was a year ago.

There is plenty of room for spreads to widen out aggressively from these levels particularly in the financials space; players looking to buy the dip should probably hold their fire.

LIBOR and bank funding rates are likely to widen out (before the Federal Reserve inevitably intervenes); this will directly eat into bank profits and pressure the bottom line for the financial industry.

Will a U.S. debt deal get done in some shape or form?

Absolutely yes.

It is an election year and for the first time, the Republican Party seems to have President Obama locked in a vise-like grip.

Will it be simple?

Absolutely not.

The market suffers from ADD (attention deficit disorder) and can only really focus on one phenomenon at a time.

It is important to bear in mind that the market will re-focus its attention on Europe's deep malaise as soon as we get past the hump of a temporary U.S. debt ceiling resolution.

For now, the European core (namely Germany) is bearing the costs of back-stopping the sagging debt of Europe's periphery (through direct and indirect guarantees).

Ironically, the costs being borne by Europe today are the painful costs of a future de facto political unification of the European continent.

Monetary union came first, a fiscal union is in the works, and the future portends a political / military union.

We are living in interesting times and the geopolitical layout of the world will look a lot different a decade from now.

Stay tuned.