What's the TED Spread?
Today, the gulf between the three-month U.S. Treasury yields and the three-month LIBOR rate—aka the TED Spread—widened to its highest level since the 1987 stock market crash. LIBOR (pronounced LYE-bor) is the interest rate at which banks charge each other on the London interbank market.
So, what's the significance? Essentially, the TED Spread measures market stress by revealing the willingness (or reluctance) of banks to lend money to one another. "A jump in the spread shows how panicky banks are, in that they are charging each other a bigger interest-rate premium than money lent to the U.S. government," says CNNMoney. (You can find more on the implications here.)
Why did the spread widen? Three-month rates on T-bills dropped to their lowest since at least 1954, Bloomberg reports, as "a loss of confidence in credit markets worldwide prompted investors to abandon higher-yielding assets for the safety of the shortest-term government securities." Remember, a "flight to safety" sends bond prices higher and yields lower, because bond prices move inversely to yields.
Tags: Wall Street | stock market
Tools: 
Share
|
| Comments (3) | Print
Reader Comments
How About The FDIC???
Unbeknown to most folks, Georgie revamped the FDIC in 2006 to include additional institutions into the depositors insurance fund (DIF) and after IndyMac failed, it is now down to $40B so it may require a bailout also before long. The media press should be searching for everything this administration has tinkered with because they have greatly weakened our safety nets by messing with the rules and funds. As I have feared from the beginning of Georgie's Reign of Terror the damage caused by his meddling misfits of mayhem could be far reaching more than advertised. I am recommending to all that they monitor their banks at the website http://www2.fdic.gov/idasp/main_bankfind.asp
Remember, that should a bank fail, expect up to 90 days to retrieve deposits!!! Good Luck Everyone....
Sloshing money
I don't think that higher taxes is necessarily a better way to reduce cash; maybe just close down the printing presses for a while - they have been working overtime. If we want to make something more valuable, why not just restrict the supply?
Due to too much cash sloshing around from tax rates too low over time, interest rates are too low and have been for a long time. If we had been operating at rates about 3 full points higher on all loans, bonds and treasuries, we would have a far more healthy economy.
I know this defies the "experts", but it's true nonetheless.
advertisement
