TED Spread is at a 9-month low

Well, even though the data in the real economy is looking pretty bad. There is good news. The Ted Spread is at a 9-month low. That should be very supportive of capital markets over the near term.

“Lending confidence at banks rose to the highest level in more than nine months, signaling the global credit crunch may be easing.

The so-called TED spread, the difference between what the U.S. government and banks pay to borrow in dollars for three months, dropped to 77.7 basis points today, the lowest since August. It was at 79 basis points as of 11:53 a.m. in New York. The spread averaged 39 basis points in the seven months through July last year, before the global credit squeeze began.

The shortage in lending has eased since the Federal Reserve provided $29 billion of financing to secure Bear Stearns Cos.’ takeover by JPMorgan Chase & Co. on March 17. The cost of borrowing soared last year as banks hoarded cash amid the collapse of the U.S. subprime-mortgage market. The Fed has cut borrowing costs seven times since September and offered new loans to banks in to revive lending and stave off a recession.

“The worst of the fears about the liquidity crisis appear to be alleviating,” said Peter Jolly, head of markets research in Sydney at NabCapital, the investment-banking arm of National Australia Bank Ltd. “Liquidity is becoming more available ever since the bold moves by the Fed.””

Bloomberg News, 20 May 2008

Note: I now have a link on the sidebar to Bloomberg’s Ted Spread Chart, which takes you here. I also have a link on the whole credit crisis timeline here.

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