The third quarter of 2002 is one that most bankers will try hard to forget in years to come. "It has been pretty awful," says one global head of capital markets. Niall Cameron, global head of syndicate and trading at ABN Amro, says: "Debt markets are being led by the equity markets. The scale and volatility of equity price falls have spooked bond investors. We have seen unprecedented volatility in the spread markets."

Corporate bond spreads, or yield premiums, have regularly whipsawed by 50 to 100 basis points in a single day. Traders say they feel as if they are walking through a minefield in which corporate credits are exploding out of nowhere.