TED spread

Discussion in 'Index Futures' started by nitro, Aug 16, 2002.

  1. nitro


    Does anyone here trade the TED spread?

    I find it fascinating and was wondering if someone can point me to some "literature."

  2. rs7


    I have not even heard that term in probably 10 years. Does it still exist? I am not certain it would since the Euro came into existence. But I am not sure.

    But even if the instruments are still there, with interest rates so low, I don't know if this is a viable trade. I mean how much volitility can there be at these levels? If there is any at all (another thing I haven't looked at in forever).

  3. I have to ditto RS7 on that nitro. Sorry! I cannot even remember the instruments.

    After all, I'm only good for getting info from you, not giving it too you.

  4. nitro


    I know a trader that worked as a local in the TB pit when I was at the MERC as a clerk. He used to spread the front months against the back in some way...not sure how.

    Tonight, I heard he was trading the Eurodollar, spreading it with "something." I really don't know, just got me thinking about it again...

  5. But I'm gonna search the internet right now?

  6. nitro


    Treasury Bill/Eurodollar spread.

  7. Nitro,

    I used Yahoo search and put in TED spread and was welcomed with something lame first, but the first page of web pages has probably all you want to know. There are several PDF downloads, one of which I read. Refreshing as it was, I, unlike you, have all I can handle with my 4-5 stocks.

    This is what I read:


  8. Nitro,
    .. this is a short note from a course I took a few years ago:

    Intermarket spread named TED : TB vs ED

    Fundamental analysis for TED : same maturity but different quality.
    e.g. we have $1 mil, should we go to London (ED) to invest, or inverst in TB?

    Treasury = no risk ('quality'), Libor = more risk

    now, if we expect interest rate to increase, i.e. will not be good for the economy, there will be a Flight to Quality, therefore people will sell Eurodollars, and buy T-Bills.... so you short ED and long TB.

    If we think rate will decrease, i.e. good for economy, there will be a flight to yield, therefore people will sell TB and buy ED

    Technical Analysis : the chart of the TB vs ED is independent to its parents, therefore you could use it with all your tech. ana. signals in itself, you don't care much for the charts of TB or ED.
    (nor the fundamentals, i.e. Flight to Quality, ect... ) :D

    The problem with this spread is the volume of the TB future is very low, therefore you have to do it with cash.

    p.s. : I presume you know the reason for spreads trades(comparing to going only one leg)

    Cheers !!! :)
  9. Pabst


    Virtually untradable. T-Bills are down to about 1k a day in volume, after once being(pre ED) one of the most active contracts in futures. I still look at the TED from time to time to see if the market is assigning credit risk to non treasuries. Merely subtract the price of the ED from the front month TB(there are no TB back months) to figure out the TED.
  10. nitro


    RS7, inandlong, dojibear, Pabst:

    Thanks for the replies and info.

    #10     Aug 16, 2002