The TED spread is an indicator of perceived credit risk in the general economy. The bigger the TED spread, the greater fear among banks that an over-night loan from one bank to another won't be paid back.The TED spread is the difference between the three-month T-bill interest rate and three-month LIBOR (LIBOR reflects the credit risk of lending to commercial banks, where as T-bills are considered risk-free... we'll see how long that lasts).
During the summer of 2007, the Subprime mortgage crisis ballooned the TED spread to about 1.5-2.0%.
On September 17, 2008, the record set after the Black Monday crash of 1987 was broken as the TED spread exceeded 3.0%.
Today, we're looking at a TED spread of 3.5%. Yikes!
Sources:
Wikipedia so it must not be true.
1 comment:
I suspect this is partially due to market manipulation by rich speculators. I think most of Monday's stock market drop was due to speculators driving stock prices down for two goals:
1) Intimidating Congress and the public to accept the Wall St. bailout.
2) Creating enough of a panic to drive stocks way below actual values. Then, they can buy up the stocks for much less than they are actually worth.
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