Click here to join our mailing list to receive the latest news and updates as they happen. Unsubscribe any time.

TED Spread

The TED spread represents the difference (spread) between what banks and the U.S. government pay to borrow for three months.

The U.S. government is considered to be “risk-free” while banks are not. As such, the TED spread is a common indicator of credit market risk.

As risk goes up, it affects lenders’ funding costs. That can manifest itself in higher mortgage rates.

A “normal” TED spread is considered to be 10 to 50 basis points (bps), with the long-term average being roughly 30 bps.

Here’s a link to it’s current value.

In October 2008, the TED spread reached an astonishing 460 basis points. That coincided with variable mortgage rates rising to a virtually unprecedented prime + 1.50% at some major banks.



Chart data source:  Bloomberg