Check out the Treasury-Eurodollar (TED) Spread. This tracks the difference between the interest rate on U.S. Treasuries versus the rate on Eurodollars (borrowing dollars in europe). The sread widens during crisis and narrows during calm.

http://www.spreadscope.com/Graphs/TB1299IEU1299ITBEU.html

LINK

-- nobody (nobody@nowhere.com), December 05, 1999

Answers

Try this Link

In June the spread was around 80. Friday (Dec 3) it was 162.

Nobody, what are the factors that make it change? Just confidence, or are there other factors?

-- semper paratus (always@ready.now), December 05, 1999.

I'm not an expert, but I think it is a confidence barometer. Treasuries are considered the safest $ based interest bearing investment, while Eurodollars (not Euros) are one of the riskiest. The TED spread increases on a flight to quality. I don't know what caused the recent huge move. I am not sure how high it got during the Asian crisis.

http://www.chaostan.com/hedges.html

-- nobody (nobody@nowhere.com), December 05, 1999.

Sheesh! That's quite a change!

I bet this has something to do with all that screwing around with floating liquidity that Alan Greasepan the Repo Man has been doing. I don't know what it means but I don't like it!

-- Hawk (flyin@high.again), December 05, 1999.

(For informational purposes only:)

Franklin Sanders describes the TED Spread in detail in his article entitled . It's worth reading. The recent conversion to Eurodollars doesn't change the essentials, according to Sanders. He says of the TED Spread:

"[it] is a confidence barometer. When there's no crisis brewing, the spread tends to narrow. When people fear financial crisis or war, the spread widens out."

-- Tom Carey (tomcarey@mindspring.com), December 05, 1999.

Sorry!

-- Tom Carey (tomcarey@mindspring.com), December 05, 1999.