Wednesday, March 18, 2009

The TED Spread Stabalizes


I'm going to start monitoring some of the key economic indicators to help track where we are in the economic recovery process. The first that we will be looking at is the TED Spread.

In short, the spread is used to measure of the perceived risk of credit in the overall economy. It measures the difference between interest rate on US Treasury Bills (considered to be risk free) and the cost of inter-bank loans ("credit flow"). See the chart below:

The TED spread has stabilized to August 2007 levels, and with the FED taking some drastic action, I would expect the spread to trend down in the coming months. Yet another positive indicator that the crisis is beginning to find a bottom.


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