Small Cap Network Blog

The media pounced on the rising TED spread when they thought they could scare the crap out of all us with it (which they successfully did). So, how come these same reporters aren’t buzzing when the very same TED spread - a measure of willingness to lend and extend credit - is back to normal levels? I guess good news is the same as no news. Anyway, check it out - the TED spread says the lending market is basically healthy again.

I don’t want to dive all the way into what it is and how it works. If you want the complete explanation, here’s our initial coverage of what was then a sky-rocketing TED spread. My point today is only to let you know the good news…..that the TED spread is at 1.75. That’s not as low as the sub-1.0 figures we saw in the middle of the year. However, the credit market survived bouts with a TED spread above 2.0 late last year and early this year. So, 1.75 is plenty adequate. Besides, the spread is also still in a downtrend.

Here’s the chart from Bloomberg, which actually does not give you today’s data. Even without it though, you can see the change.

Will this save the market from certain doom? Depends on your perspective. I don’t think anybody cares about the TED spread right now, and I doubt they’d be net stock buyers today even if they did know. In the long run though, this does mean things (i.e. loan money) are flowing again. That’s good for the economy, which is ultimately good for the market. It shouldn’t take more than a few months or so for the full effects to materialize.

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