I reviewed a number of credit measures in yesterday's post and concluded: Most indications are that the credit market tide has turned on the back of the massive reflation efforts orchestrated by central banks worldwide and that the credit system has started thawing.

Further evidence that the convalescence process is on track has just arrived, courtesy of Asha Bangalore (Northern Trust). It comes in the form of data showing a sharp decline in primary institutions' borrowing at the discount window - down by almost 65% since the panic peak recorded during the week of October 29, 2008.

20-mei-cc1

Source: Northern Trust - Daily Global Commentary, May 18, 2009.

Read together with the impressive tightening in credit spreads since October/November 2009, this measure serves as a further indication of progress that has been made with the fixing of the credit machine. However, the unclogging process still has a way to go before confidence in the world's financial system is restored to pre-crisis levels and liquidity starts to move freely again.