A key measure of risk reached its lowest level since last fall as investors snapped up the biggest junk-bond issue of the year, further signs companies can now borrow to meet their cash needs but still have to pay above-normal rates.
"A few months ago, you couldn't give a bond away," said Mitch Stapley, chief fixed-income officer for Fifth Third Bank in Grand Rapids, Mich. "But now signs are coming into place that things are looking better, there becomes a scramble to get that credit exposure."
Credit markets are extending a rally that took hold in April -- tracking gains in stock markets -- as investors became more confident banks were recovering from the recent market turmoil and the housing market was showing signs of having hit a bottom. The reduction in Libor indicates liquidity is returning to the financial system, and the ability of companies to sell debt shows they can finance themselves, albeit at higher rates.
Momentum gathered in deals eligible for a federal program to boost consumer lending, and Bank of New York Mellon sold bonds without government backing.
Here's the accompanying chart