US and European bond markets are suffering. July was the weakest month for US bond issuance in seven years and the situation in Europe is no better, though the true state is obscured by the August slowdown.
The primary equity business shows no sign of picking up, and it may be months before corporates accept the new price of equity. Suddenly investors and corporates see risk everywhere. The former are in the midst of a flight to quality and the latter are retreating into conservative strategies.
All this feeds back through the banking industry and leads to a repricing of assets.
Investors are unwilling to take on more credit exposure unless they are fully confident in an issuer's credit story. But the markets have not closed entirely. David Marks, managing director for debt capital markets at JPMorgan, says: "If you look back at the typical market crisis, such as emerging markets in 1997 or Russia in 1998, the markets as a whole implode. Illiquidity becomes the dominant theme - spreads widen but there isn't much actual trading at these levels.
"There is a flight to quality and all credit products suffer.