Industrial companies gain from low rates

The same credit crunch gripping banks, brokers and insurers is providing industrial companies with the lowest short-term borrowing costs in almost four years.

Yields on commercial paper due in 30 days sold by manufacturers and retailers fell to an average 1.93 percent last week, while those for financial borrowers rose to 3.15 percent. The spread between the two widened as much as 1.45 percentage points, the most since the US Federal Reserve began compiling the data in 1997. Banks historically issued short-term IOUs at yields about 0.02 percentage point less than industrials, Fed data show.

Money-market funds that gorged on the debt of financial companies are now pouring cash into Treasury bills and corporations which avoided the troubled mortgage bonds that contributed to the failures of New York-based Lehman Brothers Holdings Inc and Washington Mutual Inc of Seattle. Yields on 30-day non-financial commercial paper dropped to 1.86 percent on Sept 24, the lowest since November 2004.