Let me make a quick call here: I think we will not widen from significantly from where we have been yesterday!

Yesterday high yield corporate bonds spreads measured by the spread
to worst level of the JpMorgan High Yield HY 100 Index blew out to
16.94% which was the highest credit spread seen ever since the modern
high yield corporate bond market came into existance in the early 1980's.
We know that high yield is an asset class prone for booms and busts but
to put this level into perspective remember that the highest spread level
seen an 12/31/1990 at a level of 10.96% when the great junk bond crisis
often mentioned in connection with Mike Milken was in it's full swing. 
We have seen another very high spread mark at 10.60% in October 2002 where
we had our last big high yield bond crisis but what are market prices trying
to tell us today, when spreads by astonishing 55% from it's former highs?
For years smart credit experts have been waiting for the next big
wave of defaults to come and the extend of bankruptcies waiting to happen
and default losses as a result of low recovery values are just
somewhat bigger than those in the crisis we have seen before. I don't expect
credit spreads to widen significantly from where we are today but market will
most likely stay extremely volatile and dysfunctional for a while. Distressed
players are estimated to have at least EUR 300bn-400bln of cash on the sidelines
which they may put to work as soon as it becomes cleared how bid the damage
to the real economy in this downturn will be. My guess is that this is a matter
of a couple of months and very much related to earnings reports in Q3 and Q4 and
Q1 2009 at the latest. Now everybody has fear of loosing money and the next
thing will be the fear not to make money.

I will post spread charts in the next post.