Private equity deals cooled dramatically after the first week of July according to Scott Stoddard writing in Investors Business Daily on July 31, 2007. Of the deals made in July, 71% by value occurred in the first week.
This is an indication of continuing tightening in the long-term credit markets. As banks take hits on bridge loans and begin to opt out of that game, availability of long-term credit may be reduced further.
Since long-term rates are determined by market forces, Federal Reserve lowering of short-term rates won’t help. Easing short-term rates might give the stock market a temporary boast while simply postponing the day of reckoning for the long-term bond market.
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