NEW YORK (Bloomberg) - Before credit markets from New York to London seized up a year ago, investment-grade companies could sell record amounts of debt in days. It took Tyco Electronics Ltd. treasurer Mario Calastri 12 months to complete the bond sale he began last July.

"In the current rate environment, nobody really wants to stick their neck out," Mr. Calastri said. He's one of more than 60 treasurers who has been forced to reduce borrowings, accept less favorable terms, or wait months because the turmoil is stifling investor demand.

The bond-market headwinds may thwart efforts by US Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson to keep the economy out of recession with interest-rate cuts and stimulus checks. Even though the Fed's interest-rate target for overnight lending between banks is the lowest in four years, issuers are paying about the highest borrowing costs since the last recession in 2001, according to Merrill Lynch & Co.'s US Corporate & High Yield Master Index.

US corporate-bond sales have dropped 11 percent to $640 billion in the past year as the number of issuers shrank almost a third to about 660, according to Bloomberg data.

The yield gap between companies' debt and US Treasuries soared as high as 421 basis points, the most in almost six years, according to Merrill Lynch's index. Companies are defaulting at the highest rate in more than two years, according to credit-rating company Standard & Poor's.

As issuance of both bonds and short-term debt dried up this year, companies including telephone-service provider Sprint Corp., specialty-finance company CIT Group Inc., and automaker Porsche Automobile Holding SE tapped bank credit lines. Tyco Electronics' Mr. Calastri, 51, bowed to investor demands to pay a higher interest rate if the Bermuda-based electric-connector maker were to have its credit rating downgraded.

"The fever hasn't broken yet," said Lakshman Achuthan, managing director of the Economic Cycle Research Institute in New York. "The Fed is trying to address this. The question remains how effective it has been."

At General Mills Inc., getting a deal done took patience as demand plunged in January and February, Treasurer Daralyn Peifer said. The Minneapolis-based company, rated Baa1 by Moody's and BBB+ by S&P, sold $750 million of bonds in March.

"We basically watched, day by day by day, for months and waited for a perfect window," Mr. Peifer said. "And, lo and behold, we got a half a window."

Only last year, General Mills could sell bonds almost as fast as Cheerios, the breakfast cereal it began making in 1941. Companies were selling an average $26 billion of bonds a week, and investment-grade borrowers were paying yields over Treasuries averaging 91 basis points.

Then, in June of 2007, two Bear Stearns Cos. hedge funds imploded as defaults on sub-prime mortgages reached record levels, prompting investors to flee all but the safest debt.

As markets froze, investors, bankers and company treasurers were forecasting no more than a few tough months.

"We thought it was kind of a second-half-of-2007 issue," said Brad Lutz, a vice-president of investment research at Declaration Management and Research in McLean, Virginia, which oversees $21 billion in fixed-income assets. "That's bled into the third quarter of 2008."

Now the squeeze is being felt around the globe. European corporate debt sales tumbled 19 percent, to 476 billion euros ($741 billion) in the first seven months of 2008. In Asia, offerings are down 51 percent to $14.9 billion.

Joung Kyu Kim, a funding manager at Seoul-based Woori Bank, canceled a $500 million bond sale in February as borrowing costs rose. Woori, a unit of South Korea's third-largest financial services company, may instead take out bank loans.

"I hope the market will improve in the second half of the year, but negative sentiment is still prevalent," Mr. Kim said in an interview.

Bond demand did increase from March to May as investors bet the worst of the crunch was past. Investment-grade sales reached a record $122.3 billion in April and $128.5 billion in May.

In March, Merrill Lynch completed a $7 billion offering, its biggest, and ArcelorMittal, the world's largest steelmaker, sold a record $3 billion of debt. Sales this year still exceed those in the same period of 2006.

Selling debt now is "like a surgical-strike campaign," said Jim Esposito, global head of the investment-grade business at Goldman Sachs Group Inc. "The prudent course of action is to get in and out quickly, because windows of opportunity don't last very long."