Indeed, risk spreads in both short-term and long-term markets have narrowed since late last year, and equity prices, after a sharp decline earlier this year, have rebounded substantially in recent weeks. However, financial markets continue to be fragile, many risk spreads are still elevated, and investors appear to remain uncertain about the strength of some financial institutions.
Some of the government programs I have discussed – those to restart markets, provide additional capital buffers, and open outlets for legacy assets – are just now being implemented. While these programs are promising, we will not be able to judge their success for a time.