Apparently its a better indicator of the poor economic shape we are in right now than measures of the stock market.
What is the TED Spread? Wikipedia tells us:
The TED spread is the difference between the interest rates on inter-bank loans and short-term U.S. government debt ("T-bills") . . . TED is an acronym formed from T-Bill and ED, the ticker symbol for the Eurodollar futures contract. . . . The TED spread is an indicator of perceived credit risk in the general economy[1]. This is because T-bills are considered risk-free while LIBOR reflects the credit risk of lending to commercial banks. When the TED spread increases, that is a sign that lenders believe the risk of default on inter-bank loans (also known as counterparty risk) is increasing. Inter-bank lenders therefore demand a higher rate of interest, or accept lower returns on safe investments such as T-bills. When the risk of bank defaults is considered to be decreasing, the TED spread decreases[2].
So its an indicator of the risk associated with lending money. It is a graphic representation of the current unwillingness of banks, or anyone else, to lend anything to anybody.
