TED Spread Continues to Narrow

Aug. 5.10 | About: SPDR Barclays (BIL)

Below we highlight the movement in the TED Spread over the last 12 months. For those unfamiliar with the indicator, the TED spread measures the difference between the three-month T-bill interest rate and three-month LIBOR. When the spread is high it is indicative of a higher level of perceived risk in the credit markets as banks increase the rate at which they are willing to lend to each other.

Based on the movement in this indicator, investors are once again embracing risk. Since peaking out at 48.6 basis points (bps) back in mid June, the TED spread has now narrowed by over 40% and is now at its lowest levels since May 11th.

click to enlarge

Click to enlarge