[lbo-talk] TED Spread: Still Dead

dredmond at efn.org dredmond at efn.org
Thu Oct 30 01:06:55 PDT 2008


Bloomberg has a handy-dandy chart, tracking the so-called "TED spread", or difference between the 3-month T-bill and the 3-month LIBOR (dollars bought in London by banks). It's one of the best measures of credit stress around - for most of the 2000s, the spread was 0.3. Since August 2007 it's been in the worrisome 1.5 range, and spiked to a cataclysmic 4.6 in early October -- meaning, interbank lending had simply shut down. Since then, central banks flooded the system with liquidity, and the spread eased to 2.5 (i.e. moved from cataclysmic to horrible). Crisis over? Nope, the spread has been moving back up again:

http://www.bloomberg.com/apps/cbuilder?ticker1=.TEDSP%3AIND

To make a long story short - more credit carnage is ahead, and even bigger bailouts will be needed.

-- DRR



More information about the lbo-talk mailing list