Signs of credit market thaw begin to emerge

But other corners of the debt market are improving, which could put "a floor underneath the economy and sows the seeds for an economic recovery," said Tony Crescenzi, chief bond market analyst at Miller Tabak & Co.

Some of the renewed appetite has been for debt backed by the government, including a $10 billion General Electric bond offering. That was backed by the Federal Deposit Insurance Corp.'s temporary guarantee program, which was set up last fall to help companies get financing.

Investors also have renewed interest in speculative bonds — also known as "junk" — that offer higher interest rates than they could get by owning U.S. government debt, where yields have plummeted to record lows in the last month. The yield on two-year Treasury note now stands around 0.75 percent.

By paying higher yields, companies compensate investors for the higher risk of default that comes from owning such bonds.

Cablevision subsidiary CSC Holdings Inc. set out to raise $500 million in its high-yield offering last week, but strong demand brought in $844 million for the media and cable company. Bethpage, N.Y.-based Cablevision, which sold the five-year notes with an interest rate of 11.375 percent, will use the proceeds to pay down $1.7 billion in debt coming due this year.

Being able to pay down the debt is important because the company won't have to tap bank loans or cut other expenses to cover interest or principal payments.

On top of that, investors moved $882 million into high-yield corporate bond funds last week, the largest since September 2003, according to AMG Data Services.

Another significant shift in credit markets is showing up in the substantial increase in the issuance of commercial paper, which companies sell as a low-cost source of cash used to meet short-term financial needs.

According to the latest figures by the Fed, commercial paper outstanding increased by $83.1 billion, or nearly 5 percent, to a seasonally adjusted $1.76 trillion in the week ended Jan. 7. That puts it close to the $1.82 trillion that was in the market in September before Lehman's failure.

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The Fed has also ratcheted down its key interest to hover between zero and 0.25 percent, a record low. In that move last month, the central bank signaled it would hold rates at such levels for some time to help cushion the blows of a recession that has just entered its second year.

The actions by the Fed and other central banks around the world have pushed down borrowing costs. The London Interbank Offered Rate, or Libor, now stands around 1.09 percent, its lowest level since June 2003 and about a quarter of what it was in October, according to the British Bankers' Association.

It's not just businesses that are benefiting from improving credit conditions. Mortgage rates have also tumbled since the Fed in November announced plans to spend up to $500 million to buy mortgage-backed securities in an effort to bolster the ailing U.S. housing market.

The average rates on the 30-year mortgage fell to 5.01 percent last week, the lowest since Freddie Mac started tracking the data in 1971.

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