The Ted spread, which was once largely ignored, became a closely watched indicator during the financial crisis in 2008. The Ted spread represents the difference in yield between the interest rate a bank demands to lend money to the U.S. Treasury, and the rate it demands to lend money to another bank. An increase in the difference between these two interest rates indicates that fear is rising. For the past year or so the Ted spread has been mostly stable. However, it pushed much higher in August hitting a one-year high this week. While this indicator is still far from the panic high of 2008, it is definitely heading higher, pointing to some erosion of confidence in the banking system. As a result, we will continue closely monitoring the
Ted spread, and the potential warning signal it is sending to investors.
