While the stock market has been showing signs of stabilization, fresh problems in the credit markets are showing up. High yield (the bonds formerly known as junk) spreads are at 52-week highs. Check out the AAA commercial mortgage credit swap spreads (turn the children’s eyes away, this is ugly). Don’t even look at the lower grades.

I don’t know where we’re going, but I’m pretty sure we’re not there yet.

How about corporate debt, you say? Well, you’ll be sorry you asked.

Edit: The Financial Times picks up this story. Page one in the print edition.

Edit: Jeremy Grantham in this weekend’s Barrons:

I have yet to meet a private-equity firm that put into its spreadsheet the assumption that system-wide profit margins could decline by 20% to 30%. They have taken the current, abnormally high profit margins as a given and then determined to improve them by, let’s say, 15% and assume everything works out pretty well. But if the base declines by 20%, even if they end up improving margins by 15%, they are going backwards. And if they pay the 25% premium up front, which was normal, and if they leverage 4-to-1, which was normal, then they almost precisely wipe out all of the clients’ money, all of the 20% in equity and if, perish the thought, they don’t add 15%, but add perhaps zero to 5%, then they do more than wipe out the equity, they leave the underlying debt in ragged disarray. That is the next shoe to drop on the credit side.

… you’ve got to ask yourself a question: Do I feel lucky? Well, do ya, punk?

Edit: Bloomberg: CDO Losses Driving Credit-Default Swaps to Record, Analysts Say

Edit: Financial Times: Subprime losses could rise to $400 bn

Speaking after the meeting of Group of Seven finance leaders, Peer Steinbrück, German finance minister, said the G7 now feared that write-offs of losses on securities linked to US subprime mortgages could reach $400bn. This is sharply higher than the $120bn credit losses that Wall Street banks and other institutions have revealed in recent weeks – and also far bigger than the US Federal Reserve’s estimates for subprime losses last year of $100bn-$150bn.

Edit: WSJ: New Hitches In Markets May Widen Credit Woes

A widening array of financial-market problems threatens to trigger a new phase in the global credit crunch, extending it beyond the risky mortgages that have cost banks and investors more than $100 billion in losses and helped push the U.S. economy toward recession.

In the past few days, low-rated corporate loans — the kind that fueled the buyout boom of recent years — have plummeted in value. As a result, banks are expected to try to unload some of those loans this week at fire-sale prices.

Nervous buyers also have retreated in recent days from the market for securities backed by student loans and municipal bonds, roiling some corners of the short-term money markets. Similarly, investors have recoiled from debt backed by commercial real estate, such as office buildings.