Ted Spread

AAA

DEFINITION of 'Ted Spread'

The price difference between three-month futures contracts for U.S. Treasuries and three-month contracts for Eurodollars having identical expiration months.

INVESTOPEDIA EXPLAINS 'Ted Spread'

The Ted spread can be used as an indicator of credit risk. This is because U.S. T-bills are considered risk free while the rate associated with the Eurodollar futures is thought to reflect the credit ratings of corporate borrowers. As the Ted spread increases, default risk is considered to be increasing, and investors will have a preference for safe investments. As the spread decreases, the default risk is considered to be decreasing.

RELATED TERMS
  1. Credit Rating

    An assessment of the credit worthiness of a borrower in general ...
  2. Atlantic Spread

    An options trading strategy that involves purchasing both an ...
  3. Net Interest Rate Spread

    The difference between the average yield a financial institution ...
  4. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with ...
  5. Eurodollar

    U.S.-dollar denominated deposits at foreign banks or foreign ...
  6. Expiration Date

    The last day that an options or futures contract is valid. When ...
Related Articles
  1. The Federal Reserve
    Economics

    The Federal Reserve

  2. 5 Signs Of A Credit Crisis
    Bonds & Fixed Income

    5 Signs Of A Credit Crisis

  3. How does a credit crunch occur?
    Investing

    How does a credit crunch occur?

  4. The Money Market
    Retirement

    The Money Market

comments powered by Disqus
Hot Definitions
  1. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  2. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  3. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  6. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
Trading Center