As a barometer of the financial crisis, it's been hard to beat Libor, the London interbank offered rate for borrowing short-term funds in the banking system.

Yesterday, dollar Libor for the benchmark three-month sector set at 0.71625 per cent, extending its run of declines for 36 straight days. A comparison of Libor with the Fed funds rate shows that the gap between these two rates is at its lowest level since February 2008. Traders forecast further improvement today. The mood is a world away from the stressful peaks of Bear Stearns' rescue last March and the failure of Lehman Brothers in September when Libor took a rocket ship to the moon.

Further evidence that the banking system is stabilising is seen by activity in financial commercial paper. Lending for three months is back above that of the one-month sector for the first time since late January when the Federal Reserve's support temporarily boosted 90-day paper. Quantitative easing and the smooth completion of the stress tests for banks has eased tension. That has helped nurture the recovery in risky assets.