As such, the spread can be viewed as indication of banks' perception of the creditworthiness of other financial institutions and the general availability of funds for lending purposes.
However, in the midst of the financial crisis of 2007–2010, the spread spiked to an all-time high of 364 basis points in October 2008, indicating a severe credit crunch.
The OIS is a swap derived from the overnight rate, which is generally fixed by the local central bank.
This changed abruptly, as the spread jumped to a rate of around 50 bps in early August 2007 as the financial markets began to price in a higher risk environment.
[2] As markets improved, the spread fell and as of October 2009, stood at 10 bps once again, only to rise again as struggles of the PIIGS countries threatened European banks.
[7] Whilst liquidity is provided in excess by monetary policy authorities the LIBOR-OIS is less of an indicator of stress.