On a short fuse; The credit markets seek renewed confidence; Is the latest financial wobble over?

The crisis in the debt markets

IN TRYING to make sense of the sudden panic that gripped credit markets last week, the most apt comparison is with a previous era of computer-driven financial wizadry, excessive borrowing and unexpected correlations in financial markets. Back in 1998 a large hedge fund, Long-Term Capital Management (LTCM), blew up, putting financial markets around the world under so much strain that the American authorities forced Wall Street to rescue it.

But LTCM's exposures were mostly in government bonds, known as the "long-end" of the market, where maturities stretch from, say, ten to 30 years. The peculiarity of last week's disruption is that it …