_______________________________________Higher bond yields indicate less willingness to lend to businesses. Yields on junk bonds have jumped, signaling an aversion to risk.
_______________________________________Libor--the London Interbank Offered Rate--is what banks charge one another for short-term loans. It is the basis for many financial contracts--including home mortgages and student loans--and it is a sign of whether banks trust each other. Higher rates mean banks are less willing to lend to one another.
_______________________________________The difference between Treasury bills and a three-month Libor is a measure of stress in the credit markets. By historical standards, the spread has been high all year: it averaged about 25 basis points (0.25%) from 2002 to 2006. Higher spreads are signs of anxiety.
_______________________________________Investors have taken money out of stocks, bonds, and money market funds to buy safe assets, forcing the yield on short-term Treasury bills down. A lower yield indicates greater concern about the financial system.
