TED spread

Ted Spread

The price difference between three-month futures contracts for U.S. Treasuries and three-month contracts for Eurodollars having identical expiration months.

Notes:

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 rate associated with the Eurodollar futures is thought to reflect the credit ratings of corporate borrowers. As the Ted spread increases, default risk is considered to be increasing, and investors will have a preference for safe investments. As the spread decreases, the default risk is considered to be decreasing.

See also: Credit Rating, Credit Risk, Default Risk, Eurodollar, Expiration Date, Treasury Bill

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TED spread

Difference between US Treasury bill rate and Eurodollar rate; used by some traders as a measure of investor/trader anxiety or credit quality.

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TED spread

The price spread that occurs when opposing transactions are made in Treasury bill futures and Eurodollar futures as, for example, a long position in Treasury bill futures coupled with a short position in Eurodollar futures. A long spread that anticipates the price spread between the two contracts will widen could involve buying a T-bill future and simultaneously selling a Eurodollar future. A short spread in which a Eurodollar future is purchased and a T-bill future is sold short would anticipate a narrowing of the price spread.