By Simon Constable at WSJ
- FactSet
Why? Because the so-called TED-spread is spiking.
It measures stresses in the banking system. The higher it is the more stress there is in banking system.
Be warned stress never just stays between the banks. It usually reaches the so-called real economy in fairly short order. That’s where you and I live.
Over the past month the TED-spread has risen steadily to 32 yesterday from 16 at the end of July, levels not seen in way more than a year. That’s still well short of the extreme levels seen in 2008-2009 when it reached 463.
Be warned though, it can expand quickly so keep a close eye on it.
This somewhat obscure metric is easily calculated. Take the 3-month LIBOR rate (the rate at which banks lend to each other) and subtract the 3-month t-bill rate (the rate at which the government funds its short term borrowings.)
