TED Spread | Perceived U.S. Credit Risk

Fool.com

"When the economy is strong, the TED spread is quite low. But when the economy weakens in systemic ways, it can skyrocket as banks choose to sock their assets away in Treasuries rather than take a chance that another bank will default. Call the TED spread an indicator of the risk of an economic heart attack.

Historically, the TED Spread has been around 0.5%. Just prior to the past two recessions, 2001-2002 and 1990-1991, the spread exploded to around 1.25%.

When the Paulson financial recapitalization plan failed to pass the House of Representatives yesterday, the TED spread shot up to an all time high of 3.5%. If the economy were a medical drama, doctors would be running around shouting 'Push 500mls of (insert drug name here), stat!'"