At the heart of the crisis has been a general deterioration of confidence in the health of the banking sector and worries about a weakening economic outlook. This has led to a gradual and global repricing of credit risk. As shown in Chart 3, the yield spread between corporate bonds and government bonds has widened markedly.
In particular, lower-grade financial firms have been affected mainly on account of increased credit risk perceptions and a much lower general risk appetite. Perhaps the most striking indicator of the various stages in the current crisis is the spread between the three-month Euribor, an indicative rate for unsecured lending among banks, and the three-month euro overnight index average (Eonia) swap rate (Chart 4).