An email from a reader:

Just wanted to say that you've been doing an excellent job describing the happenings over the last few days.  In regards to the credit crunch here's another piece of evidence of how the credit markets are starting to freeze up.

There is a new issue corporate bond today from Caterpillar (CAT) and the pricing of that issue is troublesome - quite troublesome, and reflective of the dire straits of the credit market and the dysfunction which has engulfed the corporate market.

Caterpillar announced a 5 year and a 10 year this morning. The size has yet to be determined, but it is likely to be around $500 million for each tranche

In early August Caterpillar brought a 5 year bond to market, the 4.90 of August 2013. That bond priced 175 basis points cheap to the benchmark 5 year Treasury note. With the turmoil in the credit markets the last several weeks, the issue has widened on spread and this morning it was quoted 225/ 210.

The talk on the new issue is T + 325 basis points. That is fully 100 basis points cheap to the outstanding issue and 150 basis points above where the same maturity was priced six weeks ago

This is very disturbing because Caterpillar is an industrial company, unsullied by association with the credit crunch. If it takes that much concession to sell a solid stable industrial, what might the outcome be when a large financial seeks to tap the market

Rest assured that the result will be gory.