The credit market hasn’t cracked yet

, capital markets hold up a mirror to the real economy. They rise and fall in tandem with companies’ fortunes, encouraging investors to direct money towards the firms most likely to make a return on it. But the arrow of causality can also fly the other way. A dysfunctional market can choke off the supply of capital even to healthy firms, forcing them into default for no better reason than that financial conditions have tightened.The worst instances of this occur when the credit market comes unstuck, as it did in the financial crisis of 2007-09. That adds an ominous ring to the unusually sharp losses credit investors have endured recently. Based on total returns, American investment-grade bonds are down by 14% since September. European ones have dropped by around 10%, their worst peak-to-trough plunge. The credit spread, or premium paid by risky “high-yield” borrowers compared to Treasuries, has spiked from three percentage points in late December to nearly five, with around half that increase coming in May. Firms from Carvana, an American car retailer, to Morrisons, a British supermarket chain, have struggled to issue debt. Is it time to panic?