Struggle for Europe's banks to raise funds gets tougher

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The rapid tightening of credit in money and bond markets is being seen by experts as a worrying sign that once again banks may be unwilling to lend to each other.

That was one of the early harbingers of the credit crunch back in 2008.

It is now 10 weeks since any bank has managed to sell a conventional bond in any public European financial market.

Given that banks are normally tapping such markets on a very regular basis, the lack of deals has meant this is the longest-ever period on record in which no bank bond has been sold.

Banks are normally themselves the biggest buyers of other banks' bonds and also of euro-zone sovereign bonds.

They have been hit both by the eurozone debt crisis and also by regulators' plans which would force bondholders to cover banks' losses before the taxpayer is asked to bail them out.

Such worries have pushed the premium investors are demanding to buy bank bonds rather than sovereign debt from 2.02% at the end of July to 3.22% today, according to BarCap's Euro Aggregate Banking Senior Index.

It hit its peak at 3.25% on December 30, 2008.