CHRONOLOGY: The credit crunch of 2007

LONDON (Reuters) - The severe financial market credit squeeze that emerged in early August had been brewing all year and policymakers warn of long-term consequences for the world economy. Following is a timeline of events in the crisis so far:

* Q4, 2006 - U.S. housing market slows after 2 years of steady increases in official interest rates. Delinquency rates on subprime loans rise to 13 percent from 10 percent seen in 2004 and 2005, leading to a wave of bankruptcies at subprime lenders. Interest rate spreads on Collateralized Debt Obligations, repackaged bonds and loans which included subprime mortgage debt, widen sharply in December and January of 2007

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* Feb 8, 2007 - HSBC says more funds will have to be set aside to cover bad debts in U.S. subprime lending portfolios. California's New Century Financial Corp -- the U.S.'s third-largest subprime lender -- said it expected Q4 2006 loss. Spreads on non-investment tranches of home equity CDOs widen more than 200 basis points in the two days that follow

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* Feb 27 - Global equities plunge as jitters about U.S. housing combine with 10 percent drop in China's main stock index

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* June 20 - Two Bear Stearns-managed hedge funds BSC.N announce double-digit losses through April after making bad bets on securities backed by subprime loans. They sell $4 billion of assets to cover investor redemptions and expected margin calls. Merrill Lynch sells off assets seized from the funds.

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* July 10 - Credit ratings firm Standard & Poor's said it may cut ratings on some $12 billion of subprime debt. U.S. firms Home Depot Inc (HD.N) and D.R. Horton Inc (DHI.N) issue warnings about the housing market. Credit spreads measured by the iTraxx Crossover index, a widely-watched barometer of credit sentiment, jumps 20 basis points to 270 -- up almost a percentage point from record lows under 188 basis points on June 1

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* July 17 - Bear Stearns says two hedge funds with subprime exposure have "very little value"; credit spreads soar

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* July 19 - S&P slashes ratings on some top-rated mortgage bonds by eight notches.

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* July 26 - Credit spreads leap above 380 bp as loan deals for some key leveraged buyouts such as Alliance Boots are put on ice. Japan's yen surges as risky high-yield currency plays start to unwind amid generalised market stress