TED Spread Update
The TED Spread almost hit 60. Over the last few weeks it's drifted down. Today it's at 48.63. (Click here for a current read and chart.)
Meanwhile, headlines light up the daily news about the continuing European debt crisis.
So while the often broadcast "resolutions" to the crisis prove to be short-lived, you might think the TED Spread would continue to increase, reflecting the fact that European banks are reluctant to lend to each other. However, the Euro-bosses have recently set up a credit facility that allows banks to borrow from that facility, rather than have to borrow from each other, for their overnight lending needs.
Perhaps that explains why the TED Spread is easing. It's not so much that banks have increased confidence in each other. But the facility provided liquidity with reduced risk - or at least with the perception of reduced risk.
And maybe that's the key here: "perception." Can-kicking continues. Nothing of substance has been accomplished that will "end" the crisis. The more the can-kicking goes on, contributing to further weakening of the system. Manipulation of the perception of what's really happening is all that the leaders of the European Union have to offer.
Meanwhile, headlines light up the daily news about the continuing European debt crisis.
So while the often broadcast "resolutions" to the crisis prove to be short-lived, you might think the TED Spread would continue to increase, reflecting the fact that European banks are reluctant to lend to each other. However, the Euro-bosses have recently set up a credit facility that allows banks to borrow from that facility, rather than have to borrow from each other, for their overnight lending needs.
Perhaps that explains why the TED Spread is easing. It's not so much that banks have increased confidence in each other. But the facility provided liquidity with reduced risk - or at least with the perception of reduced risk.
And maybe that's the key here: "perception." Can-kicking continues. Nothing of substance has been accomplished that will "end" the crisis. The more the can-kicking goes on, contributing to further weakening of the system. Manipulation of the perception of what's really happening is all that the leaders of the European Union have to offer.
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