Excerpt from: GFT Analysts in the News
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| October 21, 2008 | | Libor, TED spread drop | When if comes to the financial markets, including the currency market, there are some measures that are very important. One of these measures is the Libor. The other is the TED spread.
Both of these indicators are dropping, showing that banks are beginning to feel better about lending to each other (Libor) and that confidence is returning to the market (TED spread).
TED spread
The TED spread is basically the difference between the three month Libor and the three month T-bill. It is a measure of confidence in business, since if the spread is wide, it means that banks trust the U.S. government far more than businesses. When the TED spread is narrow, it indicates that businesses are just as reliable as the government when it comes to repaying debt.
With the Libor and the TED spread dropping, there is a good chance that some of the volatility in forex trading and on other financial markets will ease as the credit market stabilizes.
| Topic Tags: credit markets, currency market, financial markets, forex trading, Libor, TED spread, U.S. government | |
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