Europe Stress Relieved With Swap Gap Vanishing: Credit Markets

The bond market is saying that the threat of a European banking crisis is ending.

The gap between European and U.S. benchmark credit-default swap indexes, used to hedge against losses or speculate on creditworthiness, narrowed to 0.7 basis point yesterday, the lowest since June 4, prices from Markit Group Ltd. show. The risk premium on European debt soared to a record 23 basis points on May 7 on concern governments in the region would struggle to cut spiraling budget deficits.