TED Spread as an Economic Indicatorby Chris Seabury
The TED spread represents the change between the three-month LIBOR rate and the three-month rate for U.S. Treasury bills. It is used to measure the amount of pressure on the credit markets. Generally, the spread has stayed under 50 basis points. The bigger the difference between the two, the more worry there is about the credit markets. Economists will look at this to determine how risk-averse banks and investors really are.