Hedge funds and private equity firms had an easier time raising capital in the last three months, but the market for asset-backed securities remains crippled, according to a new Federal Reserve survey.

The Fed's first-ever Senior Credit Officer Opinion Survey, released on Tuesday, suggests financial markets are still fragile because banks are reluctant to lend. But it also shows conditions are improving, if slowly.

Dealers provided somewhat more-favorable terms over the past three months to hedge funds, private equity firms and other similar private pools of capital, the Fed said.

The U.S. banking sector is still recovering from its worst shock in modern history. Many avenues for corporate borrowing, including commercial paper and asset-backed bonds, were slammed shut for a long time.

With the help of steep interest rate cuts and an array of emergency programs from the U.S. central bank, markets have gradually begun functioning again.

But the Fed's survey, which also asked respondents to compare credit conditions to those in late 2006, indicated things are hardly back to normal.

Responses to these special questions pointed to significantly tighter credit terms across counterparty and transaction types relative to the end of 2006, the report said.

Each quarter, the Fed publishes a Senior Loan Officer Survey that focuses on bank lending. The new poll, which was based on responses from 20 financial institutions that account nearly all dollar-based dealer financing, is meant to capture conditions at financial intermediaries.

Investment