There are many TEDs, but the TED in FRED is a spread. That is, the spread between the 3-month LIBOR and the 3-month Treasury bill.
A little background: LIBOR is the rate banks would charge each other for lending, which can be used to measure economy-wide credit risk. Treasuries are basically the safest assets on the market. So, a large TED spread would indicate a lot of credit risk in the U.S. economy.*
But how large is a typical TED spread? At the time of this writing, it looks like it’s about 30 to 40 basis points (0.3 to 0.4%), which is mid-range for recent years. It was up to 57 basis points in 2012 and below 20 on several occasions. A longer historical perspective shows that in times of crisis the TED spread really rises. Use the slider below the graph to change your sample period: The October 1987 stock market crash raised TED spreads close to 300 basis points, and the financial crisis of 2008 raised them to 450 basis points. Considering the whole sample, current conditions actually look pretty good.
*A side note: The TED spread is always going to be positive unless the risk on Treasuries increases much more than what current credit conditions warrant. This scenario could be caused by an increased risk of (partial) default by the U.S. government while credit conditions for U.S. banks remain unchanged. That’s unlikely to happen.
How this graph was created: Search for “TED spread” and you have your graph.
Suggested by Christian Zimmermann
View on FRED, series used in this post: