The cost of protecting bank bonds from default has fallen to the lowest level in as much as 20 months, pushed down at the same time regulators are loosening reserve rules and measures aimed at staving off another credit seizure.
Credit-default swaps tied to six U.S. lenders from JPMorgan Chase & Co. to Wells Fargo & Co. have plummeted to an average 110.2 basis points from as high as 360 basis points in November 2011, when concern mounted that Europe’s fiscal woes would spread to a contagion. The gap in relative yields between $2.2 trillion of bank bonds and debt of industrial companies is at the narrowest since December 2008, Bank of America Merrill Lynch index data show.
