The TED spread is the difference entre les interest rates are interbank loans and one short-term US government debt ( “T-bills”). TED is an acronym formed from T-Bill and ED , the ticker symbol for the Eurodollar futures contract.

INITIALLY, the TED spread Was the différence entre the interest rates for three-month US Treasuries contracts and the three-month Eurodollar contract représentée by the London Interbank Offered Rate (LIBOR). However, since the Chicago Mercantile Exchange dropped T-bill futures after the 1987 crash, [1] the TED spread is now calculated as the difference between the three-month LIBOR and the three-month T-bill interest rate.

Formula and reading

The size of the spread is usually denominated in basis points (bps). For example, if the T-bill rate is 5.10%, and the TED spread is 5.50%, the TED spread is 40 bps. The TED spreads fluctuates over a period of 10 to 50 bps (0.1% and 0.5%). A rising TED spread is a downturn in the US stock market, as it appears that liquidity is being withdrawn.


The TED spread is an indicator of perceived credit risk in the general economy, [2] since T-bills are considered risk-free while LIBOR reflects the credit risk of lending to commercial banks. An Increase in the TED spread is a sign That Lenders believe the risk of default is 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. [3] Boudt, Paulus, and Rosenthal show that a TED spread above 48 basis points is indicative of economic crisis. [4]

Historical levels


The long-term average of the TED spread has been 30 basis points with a maximum of 50 bps. During 2007, the subprime mortgage crisis ballooned the TED spread to a region of 150-200 bps. On September 17, 2008, the TED spread exceeded 300 bps, breaking the previous record set after the Black Monday crash of 1987. [5] Some higher readings for the spread were due to inability to obtain accurate LIBOR Unsecured lending market. [6] On October 10, 2008, the TED spread reached another high of 457 basis points.


In October 2013, due to worries regarding a potential default on US debt, the 1-month TED went negative for the first time since it was being tracked. [7] [8]

See also

  • LIBOR-OIS spread
  • Overnight indexed swap
  • Treasury Bill
  • Treasury security


  1. Jump up^
  2. Jump up^ Financial Glossary
  3. Jump up^ Paul Krugman – Op-Ed Columnist – New York Times
  4. Jump up^ Boudt, K .; Paulus, E .; Rosenthal, DWR (2017). “Funding liquidity, market liquidity and TED spread: A two-regime model”. Journal of Empirical Finance . 43 : 143-158. Doi : 10.1016 / j.jempfin.2017.06.002 .
  5. Jump up^ Financial Times. (2008). Panic grips credit markets
  6. Jump up^ Bloomberg – Libor Jumps as Banks Seek Cash to Shore Up Finance
  7. Jump up^ Obama Says Real Boss in Default Showdown Means Bonds Call Shots,, 11 October 2013
  8. Jump up^ UBS Asset Management Taps Derivatives to Hedge US Debt Risk,, 10 October 2013