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Third quarter corporate borrowing rises at slowest pace this year

Dec 13, 2011 Walt Wojoiechowski

Corporate borrowing slowed significantly in the third quarter, as mounting fiscal uncertainty in Europe discouraged many firm from making significant investment or expansion initiatives. The U.S. Federal Reserve reported this week that company credit rose at an annual pace of 4.5 percent during the July-September period - the slowest pace this year. The figure is down from 6.9 percent in the second quarter and 4.9 percent a year earlier. Meanwhile, outstanding debt reached a record $7.63 billion. "Concern that European leaders will fail to contain a contagion threatening the region's common currency is pushing investors to cut risk-taking, driving up relative yields on dollar-denominated debt and limiting access for the least creditworthy," report Jody Shenn and Sapna Maheshwari for Bloomberg. Companies' credit decisions were also likely affected by slow hiring trends. John Lonski, chief economist at Moody's Capital Markets Group pointed out that the rise was relatively agreeable when compared to the 1.8 percent drop in borrowing that followed the collapse of the financial market and the failure of Lehman Brothers Holdings in 2008.