TED Spread
The TED Spread is a financial measurement in the Stock Market that calculates the difference between the three month US Treasury Bill yield and the three month Eurodollar Future. It is considered to measure the confidence of investors in the stock market. A rising TED Spread means the risk for investors are increasing and they are more likely to invest in Treasury Bills, which are considered one of the safest options. The TED Spread is also used as an indicator of the future of the stock market, although experts disagree on how to use it to predict what will happen in the stock market.1
Fast Facts
- Rose to a high level in August 20072
- Has been declining since then2
- Calculated by deducting the price of 90-day Eurodollar futures from the price of of 90-day T-bills
- Rose to its highest level since August 2007 on September 17, 2008, 236 basis points
Treasury Bills and Eurodollar Future
Treasury Bills are government bonds issued by the United States Department of the Treasury to major banks. They are sold at a discounted price and mature in less than a year. The payoff comes when investors return the treasury bills and receive their full value back. Eurodollar Future are futures on deposits at foreign banks which are in US dollars.
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