The TED Spread
With Southeast Asia’s financial woes looming large in the minds of economists, the TED spread—the difference between interest rates on Treasury securities and Eurodollar instruments of the same maturity— has become an attractive measure of international financial uncertainty. This spread reflects the risk surrounding overseas deposits, without the complication of exchange rate risk. The Eurodollar embeds the default risk of the issuing bank and is generally higher than the corresponding U.S. Treasury security.
Suggested citation: “The TED Spread,” Federal Reserve Bank of Cleveland, Economic Trends, no. 98-03, pp. 07, 03.01.1998.