What TED spread level indicates financial stress?

Normal TED spread is 20–40 basis points. Spreads above 100 bps indicate elevated stress; the 2008 financial crisis saw TED spreads reach 465 bps in October 2008, reflecting near-complete freeze in interbank lending. Spreads below 10 bps indicate exceptionally calm conditions.

Is the TED spread still relevant after LIBOR cessation?

With USD LIBOR cessation in June 2023, market participants use SOFR-OIS spread or CP-SOFR spread as credit stress indicators. Term SOFR reflects some bank credit risk through the secured repo market, but post-LIBOR credit stress indicators are still evolving.

TED Spread Credit Stress Indicator

Compute the TED spread as 3-month LIBOR (or SOFR equivalent) minus 3-month Treasury bill yield, used as a gauge of interbank lending risk and broad financial system stress.

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Frequently Asked Questions

What TED spread level indicates financial stress?

Is the TED spread still relevant after LIBOR cessation?