TED Spread Back Below 1.00

The TED Spread hit a five-month low today, falling to 98 basis points. The TED Spread is a measure of the premium that banks pay to borrow money from each other compared to the yield on the 3-month U.S. Treasury Bill. The so-called London interbank offer rate (LIBOR) is currently at 1.09 percent. Subtract from LIBOR the yield on 3-month T-bills (an absurdly low 0.11 percent because of the recent flight to safety by bond investors), and you get the TED.

The TED averaged 12 basis points during the year leading up to the onset of the credit crisis in August 2007. So this economic health indicator still has a way to go before we can entertain thoughts of a meaningful recovery. But at least we are headed in the right direction.