Indeed, almost two-thirds of business and household debt in the United States is held by nonbanks, though much of the origination of the debt held by nonbank investors is done or facilitated by banks. And in March, this lending by non-banks dried up. In addition to the strains in short-term funding markets, some vital long-term lending markets were virtually closed.
As the extent of the economic disruptions became clear, the cost of borrowing rose sharply for businesses issuing corporate bonds, for state and local governments issuing longer-term municipal debt, and for issuers of asset-backed securities (ABS), such as originators of auto and student loans. Spreads in some cases widened to post-crisis highs.