Last week we examined the blow-out in bank credit spreads at issuance, over the course of 2008. So what happened to corporate credit spreads? This is much harder to judge because, as the banks dominated the corporate bond markets, there was very little true corporate issuance.Even trying to track corporate credit spreads in the secondary market is fraught with danger and difficulty, with this market effectively drying up from very early in the year. Possibly the best indicator of what happened to corporate credit spreads may be the iTraxx index for five-year, Australian CDS spreads. This index at least maintained a reasonable degree of liquidity until around the last quarter of the year.It is also probably useful to consider how the index moved through 2007, to put 2008 into context. 2007 started with bull markets and finished with the credit crunch. The Aussie iTraxx started the year trading at 32 bps and finished at 70 bps. Volatility in the index over the year ran at just over 11 bps or 30 per cent.2008 started with the credit crunch and finished with the global financial crisis or GFC, as it has become known. The index started the year at 70 bps and finished close to its peak, around 400 bps. Volatility over the course of the year ran at 49 per cent.The chart below shows that the general trend of the index was steadily wider. An initial peak of 208 bps was reached in mid-March when Bear Stearns fell into the arms of JP Morgan, as the US Federal Reserve arranged its rescue. For two months thereafter it looked like the worst of the crisis may have been over but then fears about the second quarter reporting of the US investment banks and other major financial institutions began to emerge, and the trend for the index for the remainder of the year was set from there.It was the failure of Lehman Bros in mid-September and the growing realisation of the ramifications of that, that saw the iTraxx reach a new record of 268 bps, on Friday October 10. That week the RBA had slashed interest rates by one percentage point, while other central banks in Europe and North America had cut their own official interest rates, mostly by 50 bps and out of cycle. Equity markets were plunging and the next week would see the announcement of government guarantees for banks along with sizable rescue packages for some. The GFC had arrived.The benefits of these and other moves were short lived, at least on the Aussie iTraxx. On Friday October 24, the index closed at 386 bps after widening by some 156 bps over the week. Fear was now moving from the financial economy to the real economy, as the possibility of a long and deep global recession was looking more probable. CDS spreads for real corporates were being pushed sharply wider. Of course the ban on short selling in the equity market would not have helped the situation. The companies most