Business and Personal Finance Dictionary

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• TED SPREAD
  
  Definition: The U.S. T-Bill futures price minus the Eurodollar futures price, the premium that lenders require hold Eurodollar deposits, rather than Treasury bills. Example: For example, if the T-bill futures price is 93.60 (corresponding to a T-bill yield of 6.40%) and the Eurodollar futures price is 92.80 (corresponding to a Eurodollar deposit rate of 7.20%), then the TED Spread is 93.60 - 92.80 = 0.80. One would say that the TED Spread is 80. Application: If you think the Eurodollar credit quality will improve, hence the TED Spread will narrow, then you would sell the spread, going short T-Bill futures and long ED futures.
  
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