There was a sense of bond market panic in the morning that receded by the afternoon.

European sovereign bond spreads to German Bunds reached all-time wide levels in a sign that the perception of risk had increased with the yield on the 10 year Italian sovereign bond breaching the 7% threshold again.

By the afternoon, cooler heads prevailed on expectations that a cabinet announcement by technocrat Italian Prime Minister Mario Monti could serve as a reprieve in the short-term.

Either way, with year-end fast upon us, conviction (a core belief in market direction) and a willingness to take large directional bets are both diminishing.

The primary bond pipeline was relatively quiet.

There were a couple of high yield bond deals and notably there was an inaugural Australian covered bond issue by ANZ (Australia and New Zealand Banking Group).

Australia recently passed legislation laying the legal foundation for banks to issue covered bonds (bonds with direct recourse to mortgage collateral).

Given the window of opportunity for issuers to tap the bond markets and investor demand heading into year end, we will likely see more covered bond issuance from Australian issuers.

Investors who are already long Canadian names and who got burned by European exposure will welcome the opportunity to diversify their risk.

In New York, after a Judge's eviction ruling police wielding truncheons cleared protesters who jammed "Zucchini Park" and high-power water cannons were used to get rid of the foul odors left behind by ramshackle encampments.

At its core, America is still a society with a strong "law and order" instinct.

This player recommends the movie J. Edgar; the movie does a great job depicting the historic context of public protest and the reaction of the State.

Consumer price index inflation numbers are out tomorrow.