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The London interbank offered rate that banks charge each other for loans rose for a fourth day to 4.21 percent, boosting the Libor-OIS spread, a gauge of cash scarcity among banks, to a record, while a drop in financial issuance caused the U.S. commercial paper market to tumble 5.6 percent to a three-year low, according to the Federal Reserve.
The crisis deepened after the worst month for corporate credit on record. Leveraged loan prices plunged to all-time lows, short-term debt markets seized up and even the safest company debt suffered the worst losses in at least two decades. Credit markets have frozen as financial institutions hoard cash to meet future funding needs amid deepening concern that more banks will collapse.