The U.S. recession has begun to squeeze credit markets, threatening to erase gains made by the government's massive bailout plan, data show.

Perhaps a simpler concern than a month ago, banks are now concerned companies will not be able to repay loans as the recession begins to slow the economy and to cut into profits.

In spite of the intervention, "there's been no improvement whatsoever in longer-term credit markets," Michael Darda of MKM Partners told USA Today Friday.

A measure of investor confidence in financial firms, Credit Derivatives Research's CDR counterparty risk index, has returned to levels unseen since the credit crisis was in full swing in September and early October, the newspaper said.

Strain returned to financial firms after the U.S. Treasury said last week it would not use the bailout to buy toxic assets. In the meantime, some bonds with low credit ratings are now yielding 19.5 percent, far above yields on government securities, the newspaper reported.

"People are hesitant to buy bonds, even though yields are mindboggling," said Jane Caron of Dwight Asset Management.

Looking for a safe haven, yields on government bonds have again fallen with the 30-year bond's yield dropping to 3.46 percent.