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Friday, September 14, 2007

Why the credit crunch may deepen

September 14 2007
With the $2 trillion commercial paper market locked up, it's harder for banks to lend money. Stock markets have regained some of their poise on rising hopes that the Federal Reserve will cut interest rates on Tuesday. But investors appear to be looking past one key warning sign: The $2 trillion market for commercial paper remains locked up - suggesting there could be more pain ahead for borrowers around the world. The ongoing contraction in buying and selling commercial paper, a form of debt that financial institutions and companies rely on to raise money for short periods, is likely to keep pushing credit spreads wider and, in turn, pressure borrowers.


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