Sat 12 Jul 2008
I just realized there is a easily accessible version of the TED Spread available online… from Bloomberg: the TED Spread.
Wikipedia explains the logic of the TED Spread:
…the TED spread is now calculated as the difference between the three month T-bill interest rate and three month LIBOR. The TED spread is a measure of liquidity and shows the degree to which banks are willing to lend money to one another.
There is a good reason that the LIBOR rate is getting pushed higher than the T-bill rate…? US Banks can go borrow in Europe without disclosing it — something they weren’t able to do in the US until the recent TAF and similar Fed sponsored bail outs programs were made available.
It’s noteworthy that the TED has started trending upward again over the last month or so.? This is an indication that more banking turmoil lies ahead…? although with IndyMac going down, Freddie and Fannie in the headlines, I’m surprised that this hasn’t spiked even higher.