how do we know credit freeze is over?

Discussion in 'Trading' started by stevenw, Oct 10, 2008.

  1. stevenw


    one month libor future ? 13 week t- bill? this is the info missing, which is key to know market down is over. any suggestions?
  2. when your account is still and we make 50% sucker.
  3. I was just looking into this matter on Sunday. Thanks.

    ...the TED spread is now calculated as the difference between the three-month T-bill interest rate and three-month LIBOR.

    TED is an acronym formed from T-Bill and ED, the ticker symbol for the Eurodollar futures contract. The size of the spread is usually denominated in basis points (bps). For example, if the T-bill rate is 5.10% and ED trades at 5.50%, the TED spread is 40 bps.

    On October 10, 2008, the TED spread reached another new high of 465 basis points. The longterm average of the TED has been 30 basis points.

    The TED spread is an indicator of perceived credit risk in the general economy[1]. This is because T-bills are considered risk-free while LIBOR reflects the credit risk of lending to commercial banks. When the TED spread increases, that is a sign that lenders believe the risk of default on interbank loans (also known as counterparty risk) is increasing. Interbank lenders therefore demand a higher rate of interest, or accept lower returns on safe investments such as T-bills. When the risk of bank defaults is considered to be decreasing, the TED spread decreases[2].

  4. TED
  5. This graph is OLD and is intended as a visual aid only
    (from wikipedia)