Swap spreads have accurately forecast conditions in the economy and in the financial markets. They started rising in 2007, well before the financial storm of 2008 hit. They peaked in early October '08, months before the bottom in equity prices in early March '09. They have now returned almost to what might be considered normal. Meanwhile, the debate over the current state of the economy rages, with some (including moi) arguing we've seen the worst and the economy is on the mend, and others arguing that the worst is yet to come.
I think this dramatic improvement in swap spreads is really significant. It reflects the return of liquidity to the bond market; the return of confidence in counterparty risk; the return of an appetite for risk; and a significant reduction in uncertainty. The Vix index, a measure of fear and uncertainty in the equity market, is also almost back to normal. These developments are essential in order for the economy to recovery from last year's crisis, since the crisis arose basically from a crisis of confidence in the banking system.