TED spread(redirected from Ted Spreads)
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Difference between US Treasury bill rate and Eurodollar rate; used by some traders as a measure of investor/trader anxiety or credit quality.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
A measure of credit risk, calculated by subtracting the price of three-month U.S. Treasury securities and three-month eurodollar contracts. These contracts must have the same expiration month. Because Treasury securities are risk-free and eurodollar contracts are not, an increased Ted spread indicates a greater likelihood of default.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.