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Chart of the Day: TED Spread Cardiogram

The TED spread is the difference between the interest rates on interbank loans and on short-term U.S. government debt (“T-bills”). TED is an acronym formed from T-Billand ED, the ticker symbol for the Eurodollar futures contract. Most people ignore this indicator day-to-day, because we all just assume the the heart beat of the banking market will keep beating on, but in 2008 everyone was watching it.

Basically the TED spread is the EKG for stress in the worldwide banking system, and right now it’s up over 221% in the last year. When it goes higher, that means banks are growing more & more short of breath to lend to each other. And if bankers can’t trust bankers, who can they trust? So, maybe it’s time to take note again.

The world banking system is in the last mile of the stress test, huffing & puffing on the European treadmill waiting for the Super Committee to do something super. And obviously something has to give; the question is, do we pop a nitro tab and buy some more time or do we collapse on the treadmill with the oxygen masked strapped to our faces?

As it is now, we have a long way to the full blown cardiac arrest in 2008-2009, but where we are today is absolutely a blip to be mindful of.

So, now might be a good time to cut down on the red meat and cheesecake from the banking buffet and go for long thoughtful walks. Of course, always check with your doctor (or financial adviser) before taking any prescription medications or starting a new exercise program.

(side effects may include: panic attacks, upset stomach, night sweats, mood swings, dry mouth, and frequent trips to the bathroom)

Source:

Bloomberg 

StockCharts

3 thoughts on “Chart of the Day: TED Spread Cardiogram

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  2. Pingback: Friday links: welcome back TED

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