Stocks soared after trading in the red this morning but corporate credit felt relatively firm throughout the day.

CDS (credit default swap) spreads played catch up to cash bond spreads as more shorts threw in the towel and began to cover (cash bonds have out-performed relative to CDS over the past week or so).

The enduring recent strength in cash bonds, particularly in primary new issue bonds, is driven by cash being deployed by institutional investors as well as simple supply and demand mechanics; dealer bond inventories are at an all-time low.

As if to illustrate how light dealer inventories have become, hedge fund Appaloosa has started to show bids and offers (traditionally a dealer's domain) in certain CMBS (commercial mortgage backed securities) bonds.

Mixed headlines out of Europe continue although Europe is likely to eventually muddle its way through this mess, even if it will take a while.

Volatility and choppy trading may mark the markets for the next couple of years.

There was some wild price action in securities for broker dealer MF Global, run by former New Jersey Senator and Governor (and former Goldman Sachs co-CEO) Jon Corzine.

The MF 6.25% of 2016 bonds that were issued at the beginning of August at a par dollar price (100) traded as low as 51 cents on the dollar today before closing in the high 60's.

Many players were burned by the price action.

It was truly breath-taking for an investment grade rated bond.

With year-end coming up for Canadian banks (October month-end), Bank of Montreal tapped the markets selling $2 billion of a 3 year covered bond deal; there was heavy demand and a large reverse inquiry for the bond.

Private equity shop KKR partner (and former CEO of Salomon Brothers / Citigroup) Deryck Maughan shared some very insightful thoughts (as a private citizen) in a lecture titled "Is America Still a Safe Investment?"

Beyond this immediate financial crisis, Maughan raised some great points about the need to get politicians working together on real fixes.

In a later conversation, a philosophical player pointed out that the only way to get politicians more serious about enacting necessary fiscal reform was to re-jigger campaign finance; the McCain Feingold Act did not go far enough.

In election humor, candidate Herman Cain's latest campaign video went viral on the internet (alongside a spoof by comedian Stephen Colbert).

GDP and initial jobless claims numbers are out tomorrow.