3 Chart 1 shows the spread for the euro area (red line) and the US (blue line) from January 2007 to the first week of June 2012. The spreads had been fairly stable at around five (euro area) and eight (US) basis points before August 2007. After the crisis erupted, two “regime shifts” could be seen for both the euro area and the US.
First, in August 2007, the spreads jumped and remained mostly elevated at above 50 basis points. Second, after the Lehman collapse in autumn 2008, the spreads reached all-time highs of 186 and 365 basis points for the euro area and the US, respectively. In addition, there were indications that liquidity was no longer flowing from cash-rich banks to cash-poor banks.