Swap spread update: systemic risk is fading

As further followup to my posts on the European credit crisis and swap spreads (here and here), I note that U.S. 2-yr swap spreads have now fallen almost by half since their May 25th high. European 2-yr swaps are down from a high of 90 bps to just under 77 bps. Europe still has some significant problems, but increasingly it appears that the risk of contagion in the U.S. market is low. Without contagion effects, the eventual impact of the Euro debt crisis is likely to be relatively small. More good news on the margin: the Vix index fell to 30.6 today, down from its May 21st high of 48.