8/27/2008

For taking on a higher risk of lending to investment-grade companies rather than to the Treasury, investors are demanding increasingly higher premiums, having exceeded levels in March when Bear Stearns' collapse fueled fears of a systemic crisis. Wall Street dealers have been unable to hold onto inventories of corporate debt because of mounting losses. Meanwhile, investors are demanding higher interest rates to buy the debt of financial firms. The situation could exacerbate funding needs in the near term.

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