The good news lately from the credit market–a dramatictightening in corporate bond spreads and soaring issuance–has yetto translate into easy access to credit for all companies.

The market is split between investment and non-investment-gradeissuers, says Brian Kalish, director of the finance practice at theAssociation for Financial Professionals (AFP). “If you're at thetop of the credit curve or if you've got FDIC backing, those dealsare getting done,” he says. “But if you're an A-rated entity, it'stough.”

In fact, a recent AFP survey shows 59% of companies have seen noimprovement in the availability of short-term credit so far thisyear. And 35% of companies with non-investment-grade ratings, alongwith 23% of investment-grade companies, say their access toshort-term credit has decreased so far this year.

Still, the ballooning in credit spreads from last year's marketturmoil is now shrinking. Standard & Poor's says its compositeinvestment-grade spread stood at 266 basis points on July 30, aftergetting as wide as 578 basis points last year, and the speculativegrade composite spread stood at 885 basis points, after expandingto 1,754 basis points.

As those spreads have narrowed, issuance has revived: S&Pputs global corporate bond issuance in the first half of the yearat a record $1.79 trillion. But 80% of that was done byinvestment-grade companies and about 30% involved some sort ofgovernment guarantee. Of the $595 billion of corporate bonds issuedin the United States, just $53 billion, or 9%, was sold bynon-investment grade companies.

“Investment-grade issuers have been able to access the marketpretty readily over the last several months,” says Mark Oline, headof the corporate finance group at Fitch Ratings. “If you migratedown the credit curve, the high-yield market is more open than ithas been, but it has primarily focused on the stronger, double-Bnames. But we have seen issuance spread to single-B issuers aswell.”

Non-investment-grade companies are also still largely closed outof the loan market, Oline says. “We are seeing some extensions,where companies are able to work with their bank group and inexchange for higher financing, they're able to extend theirmaturities.” But banks can no longer unload such loans to thepurveyors of collateralized loan obligations (CLOs), which used tosoak up as much as 70% of the non-investment-grade loans that banksoriginated, Oline says, “so that has resulted in a dramaticreduction in lending capacity.”

The constrained loan market also reflects tighter bank lendingstandards. The latest Fed survey of bank loan officers, in April,showed some moderation on that front, though; just 40% of banks hadtightened their lending standards for commercial and industrialloans over the previous three months, down from the 65% that saidthey had done so in the January survey.

Even as corporate bond spreads tighten and banks become lessstringent, Main Street's perception of the availability of creditwill lag, says Cary Leahey, a senior managing director at DecisionEconomics. “Main Street is dominated by smaller businesses and theyhave virtually no ties to the capital markets, where we've seen thebulk of the improvement. The small guys are just gettingkilled.”

At the short end, the commercial paper market, also the provinceof larger companies, continues to contract, with the amountoutstanding totaling just $1.066 trillion as of July 29. That'sless than half the $2.2 trillion outstanding in August 2007, on theeve of the credit crisis. Kalish notes that commercial paper hassuffered a “double whammy,” as the recession dampens corporations'need to borrow and the financial crisis leaves investors wary ofbuying any but the safest of securities.

Leahey notes, though, that while the amount of paper outstandingcontinues to decline, the share of that paper issued withgovernment backing is also shrinking. As of July 23, the FederalReserve's Commercial Paper Funding Facility had outstandingissuance of just $110.5 billion, down from $349.9 billion at theprogram's peak in January.