Closely tracking the performance of the European iTraxx credit default swap index over the first half of last year reveals that a large gap has opened up between that index and the Aussie iTraxx. That the Aussie iTraxx is wide of the European index and the same index on US credit default swap two indices is nothing unusual - but such a gap between it and the European index has not been seen since the global financial crisis. There are two explanations.The longer term answer is that the Aussie iTraxx is viewed as a proxy for China and affected by perceived risk of an economic slowdown or slump in the Chinese economy. International investors have been increasingly worried about China since around the middle of last year. However, this hasn't stopped the Aussie iTraxx from declining from a peak of around 150 basis points to moving below 100 bps in recent weeks.Yet, despite this contraction, the gap with the European index has steadily widened.  Which brings us to the second answer: investors have become much more comfortable with European corporate credit risk.This can be seen be seen in the narrowing of the spread between the European index and the US CDX index. It is also reflected in the trading of Spanish government bonds at yields tighter than those on Australian government bonds.Moreover, Portugal is now exiting its European bailout scheme, just as Ireland did last year. Even Greece is saying its economy is improving and it expects to see 0.5 per cent growth in GDP this year, after five years of recession.