In these circumstances, the excessive anxiety of market participants prevailed in the corporate bond and CP markets, and this made investors excessively cautious about taking on issuers' credit risk. In addition, market functioning deteriorated significantly: transactions decreased sharply, and the average market rates did not reflect the market fundamentals but rather were influenced strongly by specific circumstances of individual transactions.
As a result, conditions for corporate bonds and CP issuance deteriorated significantly. In the corporate bond market, the credit spread (the yield differential between corporate bonds and government bonds) on BBB-rated corporate bonds was at around 1 percent in summer 2008 but expanded rapidly thereafter, and exceeded 4 percent around the end of fiscal 2008.