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: Low interest rates are intended to ease the burden on debtors, discourage saving, encourage spending and thereby revive the economy. But they also have a distorting effect on asset markets. By reducing the cost of speculation, they encourage bubbles.

So although it is good news that some indicators (such as the cost of bank borrowing) have improved, risk appetites also need monitoring closely. The “search for yield” which marked the boom of 2005, 2006 and early 2007 seems to have started again. Retail investors, disappointed with measly returns on savings accounts, are piling into corporate-bond funds. One British manager is reportedly raking in £1 billion ($1.6 billion) a month.

Those investors will have to hope that the managers choose their bonds wisely. Standard & Poor’s, a credit-rating agency, reports that more companies have defaulted in 2009 than in the whole of last year, and expects the default rate, 7.29% in May, to hit 14.3% by next year. The agency’s “weakest link” category contains 290 firms, with nearly $370 billion of debt, that are deemed to be at risk of failure.

The banks are also rediscovering their willingness to take risks. In a review of the investment-banking sector on June 15, JPMorgan said rival banks, eager to rebuild market share, are offering to do deals at “irresponsible prices”.

The silver lining to this cloud is that large companies have been able to take advantage of investor enthusiasm to raise money in both the bond and equity markets. J Sainsbury, a British supermarket group, launched a £445 million rights issue on June 17 to fund expansion plans. The very idea would have been unimaginable three months ago.

All this is encouraging the feeling that the worst of the crisis is over. Equity markets enjoyed an almost uninterrupted rebound between March and mid-June; according to Societe Generale, the MSCI World index rose in 13 out of the 14 weeks to June 12th, the best sequence since December 1999. This, in turn, was linked to the feeling that the worst of the recession was seen in the first quarter, and that the global economy could be rebounding by the second half of this year.