Credit markets begin to thaw

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“Now that that confidence is being restored, we’ve probably seen the worst of this crisis,” he added, but “this does not mean that stock markets will be returning to previous highs any time soon.” Mr. Lennox predicted “a long period of debt deleveraging and the associated economic recession that goes with the bursting of a debt bubble.”

The dim outlook for debt-burdened consumers prompted Standard & Poor’s Corp. Tuesday to predict much higher default rates among corporations that cater to consumers. It said such corporate default rates could reach a stunning 23 percent in the next two years - creating more stress for the credit markets to absorb.

Executives at General Motors Corp.’s financing unit, one of the companies hit hardest by the credit crisis, said in an internal memo to company employees that it has “limited if any access” to financing, and that funding the company has become like “hand-to-hand combat,” Bloomberg News reported.

Dustin Reid, a senior currency strategist at ABN Amro Bank, said the most dire scenario for the economy has been averted, however.

“The coordinated government intervention takes the probability of a 1930s-style depression off the table,” he said.

The Treasury move prompted an uptick in optimism about prospects for the markets.

“We are closer to the end than the beginning” of the financial downturn which has pounded global markets, said Gerard Aquilina, vice chairman of Barclay’s Wealth, who is advising clients to selectively buy corporate bonds, mortgage securities and distressed real estate.

“If you are a long-term investor, this is a great buying opportunity,” he told a Reuters conference. “If one can stomach some volatility, I think that investors that have a five-year horizon will be very pleased.”

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