Short-term borrowing costs for financial institutions have fallen to the lowest since August relative to U.S. Treasury bills in a sign of growing investor confidence that banks will weather Europe's escalating debt crisis and the slowing economy.

The difference between what U.S. financial institutions and the government pay to borrow for three months has narrowed by almost 50 percent since December to 32 basis points. The gap between the commercial paper and Treasury bill rates has shrunk from a 2 1/2-year high of 58 basis points on Dec. 8. A separate measure of debt-market stress, the two-year interest-rate swap spread, is near an 11-month low.

Money managers are accepting lower rates to lend money to U.S. financial institutions even after they were among 15 global lenders downgraded by Moody's Investors Service on June 21. Dollar-denominated bonds from banks are returning more than twice as much as stocks this year as lenders boost capital to meet new risk-curbing regulations.