The TED spread can be used as an indicator of credit risk. This is because U.S. T-bills are considered risk free while the LIBOR rate reflects the credit risk of lending to commercial banks. As the TED spread increases, the risk of default (also known as counterparty risk) is considered to be increasing, and investors will have a preference for safe investments. As the spread decreases, the risk of default is considered to be decreasing. [wiki] The so-called TED spread widened to 367 basis points monday, ... That's a 67 ticks higher than it was on the day of the Oct. 20, 1987 stock market collapse, when it rose as high as 300 basis points. The TED spread is the difference between what the Treasury pays to borrow for three months and the amount banks charge each other for loans, measured by the spread between the interest rate on a three-month U.S. Treasury bill and the three-month Libor rate. "Prior to the crisis, normal is below 25 basis points for the TED spread,"... ted monday ted spread '87
Hi, may I ask you what your data source is for that long term TED data ? I have only 5 years of history, unfortunately.
hi, official sites for libor data http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=141&a=627 for t-bill http://www.federalreserve.gov/releases/h15/data.htm