Notwithstanding these significant concerns, however, there was little to suggest that market participants saw the financial situation as about to take a sharp turn for the worse. For example, although indicators of default risk such as interest rate spreads and quotes on credit default swaps remained well above historical norms, most such measures had declined from earlier peaks, in some cases by substantial amounts.
BIS central bankers’ speeches  1  Glenn Stevens has recently spoken at length about why these changes took place.1 In particular, he drew attention to the fact that as nominal interest rates declined and the availability of credit increased, household spending grew more quickly than income for around a decade or so.