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July 9, 2008 10:59:05 AM CDT

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Tightening Credit Markets Squeeze Banks

Posted Sep 10, 07 10:58 AM CDT in Business    Editor's Choice

(Newser) – Almost $140 billion in commercial paper has matured and is up for renewal by next week, and banks need to attract buyers to pay it off. The yield on the short-term loans, which are entangled in the subprime mortgage crisis, is skyrocketing. "This could be a pivotal seven to 10 days,'' one credit strategist tells Bloomberg.

Yield spreads are on their way up because banks attach more importance to staying afloat themselves than to financing other companies. "Banks have a very limited appetite to hold bonds on their balance sheets given other, more pressing demands for their capital in the short term," says a Deutsche Bank strategist.

Source Bloomberg

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