ANNANDALE, Va. -- Investors are exaggerating the economic risks associated with problems among subprime lenders.

That, at least, is the message of the fixed-income market, as interpreted by Investors Intelligence, edited by Michael Burke and John Gray.

In an e-mail communication early Wednesday morning, the newsletter's editors pointed to two curious features of the fixed-income market Tuesday, when the Dow Jones Industrial Average fell more than 240 points. In their opinion, both features are "saying ... that all the negative talk about an immediate collapse [of the U.S. economy] is largely overdone."

The first is the behavior this week of the futures contract on the U.S. 10-year swap spread rate.

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Though many investors would find the design of this contract and how it's calculated difficult to understand, all that needs to be understood to appreciate the Investors Intelligence argument is that the swap spread rate goes up as perceived credit risk increases.

You'd think that this rate would have skyrocketed in the wake of the problems among the subprime lenders. But the 10-year swap rate has hardly budged this week. On Tuesday, as Investors Intelligence points out, while the stock market was sent into a swoon over concerns about those subprime lenders, the 10-year swap rate rose just 0.3 of a basis point.

This stands in stark contrast to what happened on Feb. 27, when the Dow industrials fell 416 points in sympathy with a 9% drop in the Chinese stock market. On that date, the 10-year swap rate rose more than 3 basis points, or more than 10 times the increase experienced this Tuesday.

A similar story is being told, according to Investors Intelligence, by another straw in the wind of the fixed-income market: resiliency in emerging-markets bonds. This sector is often considered a litmus test of investors' appetite for risk; if that appetite evaporates, and there is a wholesale flight to quality, for example, then emerging-markets bonds will plummet.

But this has not happened, according to Investors Intelligence: "Most emerging market bonds are firm this week with no sign of an impending collapse appearing on the horizon."

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