Bob,
It isn't wise to confuse yields on U.S. Treasury obligations with what you might be charged to borrow money as an individual or business. The yields on U.S. Treasury obligations have been sinking because there is so much "flight" money seeking a safe haven. That money comes from all over--- sales of equities, movement of matured CDs, sale of corporate bonds, mortgage securities, etc.
With increased worry about credit quality, the sure thing gets all the money and the yield is low.
Home mortgages and business lending are another story. Home mortgage rates have been rising, with www.bankrate.com showing an average national rate of 6.33 percent. More important, fewer and fewer people qualify for a mortgage as lenders tighten requirements. Why, lenders even expect borrowers to have a job these days!
On the business side, while commercial and industrial bank credit grew aggressively from 2004 through the end of 2007, credit expansion has slowed dramatically this year. Check the figures at this link: http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=economic_indicators&docid=28jy08.txt.pdf
The operative word here is "expansion"--- loans are still being made and credit is still expanding. It is not like the shrinkage of business lending that happened from 2001 to 2003.
Well collateralized loans can be at relatively low rates since the banks are enjoying very low cost of funds thanks to the Federal Reserve. This may not last, however, if the July inflation rate persists. I would not be surprised if we've already seen the low for interest rates.
Scott
