The steady grind tighter in credit spreads and an uptick in stocks continued even as volumes remain light.
With most expecting a tangible announcement out of Europe on Wednesday, the momentum for spread widening seems to have dissipated for now and positive sentiment seems to be the order of the day, just as it was for the latter part of last week.
Corporate earnings have been largely supportive of the markets and more feelers are being put out for a new Quantitative Easing (QE) program by the Federal Reserve.
A grind tighter in credit spreads into year-end does not seem all that far-fetched.
The combination of a QE program with a serious European plan could send hedge funds that are short (in both equities and fixed income) scrambling to cover their positions.
The Euro closed at 1.39 against the U.S. dollar in anticipation.
That being said, while the Europeans are likely to come up with something on Wednesday, the question will be whether that something will suffice as a panacea for Europe's woes.
Europe's long-term challenges are more structural in nature and the bank recapitalization plan that is being bandied about only deals with an immediate financial shortfall.
The inevitable conversation will be about some sort of a fiscal union and that is likely to be a difficult conversation.
Oil closed above $91 a barrel as the Saudi crown prince passed away over the weekend and rumors on Monday that the Saudi monarch himself had also passed following a complicated back surgery.
The Saudi interior minister has been the de facto monarch for a while now so stability is unlikely to be challenged.
Are there other factors driving up the price of oil?
The U.S. envoy just left Syria and President Obama announced a draw-down to U.S. forces in Iraq; these could be a precursor to something else.
A devastating earthquake hit Turkey over the weekend driving home just how little control man actually exercises over things.
That policy-makers and Central Bankers have been whipped around by the markets is not altogether surprising.