The uncertainty which has sent the stocks to 12-year low has now started to affect the corporate bonds and loans which had resulted into a lot of gains earlier in the year. The short-term credit markets are still doing better than the last year. This is a result of the programs taken up by the government to buy commercial paper and guarantee short-term debt.

Bond investors are worried about the fact that government’s repeated modification to its financial rescue packages are undermining the foundation of bond investing. They want the assurance that the creditors should have the right to claim their assets first if a borrower defaults. If government cannot provide this assurance, it is risky to own bonds of stalwart institutions even.

Another important thing that is to be noted here is that investors are not sure about the government’s plan to bolster U.S. banks which can help in unfreezing the credit market. It is expected that the market could continue to drop unless there is clarity from the government on its bailout plans. Rather it would harm the economy further.

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