Many market participants claim that the current retrenching is a positive development that will guarantee the health and liquidity of the credit markets - and all that is riding on them, from corporate earnings to consumer confidence to the global economy...

"It's finally come to a head where lenders - collateralized loan obligations, total-return funds, hedge funds - in the bank-loan space have finally all said at one time, 'Enough. We want covenants, we want reasonable spreads for the risk we are taking,' " said Bradley Kane, a portfolio manager at SCM Advisors LLC.

This view asserts that the current halt in fundings in the leveraged markets will ease as soon as investors gain confidence in a market bottom. The more transitory, yield-seeking investors may not return anytime soon, but this, too, could be a positive. Meanwhile the lack of bids for leveraged paper is merely an indication that savvy investors are biding their time.

"There are players on the sidelines that want to get in, especially at these levels," said Mr. Kane. "They are trying to time the bottom."