Washington appeared closer to a bank bailout plan agreement, but that provided little solace Thursday to the credit markets, which remained stressed and kept Treasury bill demand high. The yield on the 3-month Treasury bill was at 0.47 percent Thursday, down slightly from 0.49 percent late Wednesday, suggesting no relief on the part of investors, who have been shoveling their money into government debt on the worry that other traditionally safe assets โ such as money market mutual funds โ are no longer secure. Goodyear Tire & Rubber Co., for one, had to draw $600 million from its credit lines because it was unable to access cash โ a major chunk of the which is invested in a money market fund called the Reserve Primary Fund that โbroke the buckโ last week. When a fund breaks the buck, it means its assets no longer cover each dollar invested in it. The credit markets grew tight last summer when mortgage defaults started spiking. The markets truly tightened last week, however, in the aftermath of the bankruptcy of Lehman Brothers Holdings Inc. and the government takeover of insurer American International Group Incโฆ.
AP: Credit market tightness keeps T-bills in high demand and drives up bank-to-bank lending rates
by Rich Lowry
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About the Author
Rich Lowry is the editor in chief of National Review.
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