Lending rates between banks sank yesterday, suggesting a growing willingness to lend among financial institutions. The London Interbank Offered Rate, or Libor, on three-month loans in dollars fell to 2.71 percent - the lowest level since June 9 - from 2.86 percent Monday.

But skeptics point out that rates remain far above their benchmarks set by central banks of 1 percent in the United States, 3.75 percent in the euro zone, and 4.50 percent in Britain. The spreads are twice as large as they were in mid-September, when Lehman Bros. Holdings Inc. went bankrupt.

Investors, still averse to risk, are clinging to Treasury bills. The three-month bill, considered one of the safest assets around, saw its yield tick up marginally to 0.48 percent from 0.47 percent. A low yield suggests high demand.

Meanwhile, the rates on corporate bonds keep rising. Because investors are growing more concerned about companies' being unable to pay back their debt, those companies will have to pay more to get loans.

"It's going to be a nasty ratings environment for the next couple of years at least," said John Atkins, fixed-income analyst at IDEAGlobal. com, noting that more companies are getting junk ratings.

Even highly rated companies are feeling the pain - ratings agency Standard & Poor's said yesterday that the spread, or difference, between rates on investment-grade corporate bonds and Treasury yields broke above 5 percentage points Monday to a new five-year record.

The default rate on U.S. corporate bonds rose again in October, bringing the tally of defaults so far in 2008 to 65, said Standard & Poor's. The four companies that defaulted on their debt last month were outside the financial sector: home builder Ashton Woods USA L.L.C., energy producer Baseline Oil & Gas Corp., plastic supplier Viskase Cos. Inc., and the Majestic Star Casino L.C.C.

S&P estimated that the 12-month-trailing default rate for speculative-grade debt, or junk bonds, was 2.9 percent in October. That is up from 0.97 percent in December 2007. The agency expects this rate to rise to 7.6 percent by September 2009, but could rise as high as 9.6 percent if the economy worsens more than anticipated.

In another sign that companies are not finding the credit markets a reliable source of funding, daily commercial-paper issuance has fallen over the last few days, according to data released yesterday by the Federal Reserve. Total commercial-paper issuance Monday was $159.9 billion - down from $169 billion last Friday, $181 billion last Thursday, and $214 billion last Wednesday.

Commercial paper is the short-term, unsecured loans that companies get to finance their day-to-day operations.