Credit default swaps prices on Morgan Stanley and Citigroup have dropped, CMA said. The decline comes as optimism mounts that European officials will be able to keep the sovereign-debt crisis from hitting banks' balance sheets. "Market participants have come to the conclusion that the extra-wide spread levels were an overreaction to some half-baked facts," said Allerton Smith, senior director of capital-market research at Moody's Investors Service.

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