The credit crunch softens

A rare spot of unambiguous good news: Corporations are finding it easier to raise money by selling their own bonds.

Published April 24, 2009 2:30PM (EDT)

While an anxious Wall Street hovers on the edge of its seat, waiting for clues as to the results of stress tests -- whitewash? kiss of death for Citigroup? incentive for a new maket panic? -- we actually have some  good news from the credit markets on Friday morning.

Bloomberg News is reporting that corporate borrowing costs have fallen to their lowest point since last October. In other words, it is now easier for corporations to raise cash by selling their own bonds than at any other time since before the financial crisis exploded into a full-blown meltdown. Which means that those corporations can do fun things like meet their own payrolls and continue to function.

Remember the infamous "TED spread," which Paul Krugman once described as a metric with which to measure "financial jitters?" The TED spread has also fallen below its pre-Lehman Brothers bankruptcy level.

The news doesn't mean that unemployment is going to stop rising, or that the banking crisis is over or that the housing sector has reached a bottom. But it does indicate that the monumental efforts by Bernanke's Federal Reserve to prevent credit markets from completely freezing up seem to be working. And that's pretty important -- because it represents a clear difference from what happened at the outset of the Great Depression, when the Federal Reserve failed to take the appropriate aggressive monetary policy measures. The economy is in bad shape right now, there's no doubt about that, but things could be much, much worse.

UPDATE: A commenter notes that I goofed -- the Bloomberg story I linked to does not reference the TED spread, but a different credit market metric, the LIBOR-OIS spread, which is similar in its import, but not the same. I regret the error.


By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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