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<< Previous   of   Next >>   ADVERTISEMENT   Related Stories • Lawmakers scramble after bailout bill is rejected 9/30/08 • Options that remain if no bailout bill passes 9/30/08 • Fear and distrust run high in average Americans 9/30/08   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Tuesday, September 30, 2008 Credit market's tumult deepens Associated Press NEW YORK -- The House's rejection of the financial bailout plan flung the credit markets into further disarray Monday, sending investors swarming again for the safety of Treasury bills. If the credit markets stay tight, it could spell trouble for companies trying to raise cash by selling short-term debt in the coming weeks. If those companies' efforts are thwarted, the economy could grow even weaker. On Monday, the yield on the three-month Treasury bill sank to 0.14 percent from 0.87 percent late Friday. Low T-bill yields show that investors are prepared to get virtually no return on an investment as long as it is secure. The moves in both bonds and stocks Monday were "violent," said John Spinello, bond strategist at Jefferies & Co. "We're dealing with moment-to-moment, dynamic action that's so hard to describe." Earlier Monday, the London Interbank Offered Rate for three-month dollar loans had risen to 3.88 percent from 3.76 percent Friday, suggesting that banks have grown increasingly unwilling to lend to each other. LIBOR for three-month euro loans, meanwhile, soared to 5.22 percent, the highest rate ever. Other lending rates increased, too, including those on short-term company debt known as commercial paper whose de­mand has tumbled, analysts say. And according to the Federal Reserve, about a quarter of the $1.7 trillion in total commercial paper outstanding matures this week. Another 30 percent matures in the following three weeks. "There are hundreds of billions dollars maturing over next 60 days that need to be somehow refinanced," Ablin said. "Without a working credit market, this isn't just a slowdown of the economy -- it's essentially a shutdown of the economy." READER COMMENTS Be the first to comment. You must be a registered user and verify your e-mail address to post comments to blogs or articles on HeraldNet. To register, click here. To read other terms and conditions, click here. Log out

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