"Credit freeze" disconnect

Look at this chart, with data as of yesterday, and then read the following excerpts from a top Bloomberg story this morning:

Short-term corporate borrowing fell by the most ever ... worst month for corporate credit on record ... short-term debt markets seized up ... credit markets have frozen ... the credit window is closed ... the credit markets are effectively shut, the commercial paper market is under complete duress ...

Somehow the words and the chart don't match. That's because the big decline in commercial paper referred to in the text is happening in the financial sector of the corporate world. The nonfinancial sector (shown in the chart) is for the most part carrying on as usual. We know banks are having problems; the scary thing would be if all companies were having the same problems. So far, they're not.

Credit spreads have widened considerably, and in many cases are at all time highs, but those spreads measure the difference between what corporations pay and what Treasury pays, and Treasury yields are awfully low. So, despite sky-high spreads, borrowing costs for BAA corporate borrowers, according to Moodys, have risen this year to 7.87%, just over 1.5 percentage points above the average of the past five years. That's not good, but it's not a disaster either.

How about mortgages? As of today, the average rate on 30-year fixed rate conforming loans, according to BanxQuote, was 6.29%. That's only one-quarter of a point higher than the average of the past five years. If you're in the market for a jumbo loan (over $729,750) however, it's a little more difficult. Today's jumbo fixed rate average is 7.85%, and that's 1.4 points higher than the average of the past five years.

Some more statistics to calm the nerves: According to the most recent Fed data, the following measures of bank lending are at all-time highs: Bank Credit of All Commercial Banks, Consumer Loans at All Commercial Banks, Commercial and Industrial Loans at All Commercial Banks, Total Consumer Credit Outstanding, and Total Revolving Credit Outstanding, to name just a few. Banks are experiencing some major and perhaps epic problems, but there is no shortage of credit in the economy today.