BA/ML analyst Hans Mikkelsen said.....>

US CORPORATES: BA/ML analyst Hans Mikkelsen said on "retracing the Fed's balance

sheet reduction" that "credit spreads continue to retrace - though not fully -

the recent widening off the early August tights. In fact when measured using

liquid pricing overall US bank spreads are now only 2bps wider than the Aug. 2

tights, after having widened as much as 9bps. Even more notably Telecom spreads,

that once widened at least15-18bps, are now flat to 12bps tighter compared with

Aug. 2 levels. Recall that high-grade credit spreads widened on the combination

of too much (corporate bond) supply and escalating geopolitical risks

surrounding North Korea. As the latter has been easing, it makes sense that

credit spreads improve, just as equities have rebounded to record levels."

- He adds that "on the former, we think that much of this supply shock resulted

from issuers' front loading plans to beat this week's (Sept. 19-20) FOMC

meeting, where the remaining specifics including timing of the balance sheet

reduction are widely expected to be announced."