A banking crisis implies easy money, ZIRP, various types of balance sheet expansion, and lower credit quality on central bank balance sheets. This acts to suppress credit risk, compressing spreads. This creates “artificiality” in credit market insofar as a central bank is not a natural buyer of higher risk securities. There will come a time when risk is moved off central books, and markets will have to learn how to re-price risk with no government support.
via Guest Post: Credit Spreads In The New Normal | ZeroHedge.