TED spread

T

thisisbabak

Can someone please help me track down some info on the TED (Treasury/Eurodollar) spread? I've searched around but it seems there isn't too much research that I can get my hands on. I can't even find a decent chart to see how its moved historically.

I was also wondering how to trade the futures spread. I know you would short eurodollars and long 3-month t-bill contracts to buy the spread, but can't find the proper t-bill contract (the TB contract on globex doesn't seem liquid). Any ideas?
 
Quote from thisisbabak:

Can someone please help me track down some info on the TED (Treasury/Eurodollar) spread? I've searched around but it seems there isn't too much research that I can get my hands on. I can't even find a decent chart to see how its moved historically.

I was also wondering how to trade the futures spread. I know you would short eurodollars and long 3-month t-bill contracts to buy the spread, but can't find the proper t-bill contract (the TB contract on globex doesn't seem liquid). Any ideas?
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A good book on a number of different sread strts in "The complete guide to Spread Trading" by Keith Schalp it has a number of treasury yield curve spreads in there you might want to look at.
 
I believe the T-Bills were delisted. As a substitute for the TED, (1) you could do front-month ED versus deferred-month ED. (2) ED versus Fed Funds. (3) ED versus Libors. (4) ED versus cash T-Bills.
 
Quote from nazzdack:

I believe the T-Bills were delisted. As a substitute for the TED, (1) you could do front-month ED versus deferred-month ED. (2) ED versus Fed Funds. (3) ED versus Libors. (4) ED versus cash T-Bills.
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Since I want to bet on the liquidity/risk aversion that the TED provides I think (2) and (4) are good suggestions. I just have to look into how the FF futures averaging would impact the trade, and if it's possible to trade small amounts of cash t-bills efficiently. (1) and (3) may be exposed to the shape of the ED curve (i'm assuming you mean the 1month libor contract in 3) so I don't know how closely those would track the TED.

Bogan - thanks I'll look into that
 
Regarding the "averaging effect" in Fed Funds, stay out of the front month where it governs the final settlement price. Of the four options I mentioned, (1) & (3) are easiest to implement since those contracts trade on the same exchange/platform. (2) & (4) would involve legging into and out of trades. Focus most on (1) because you have to expect that bull & bear spreading will correlate strongly to how an actual TED spread would behave when there's flight-to-quality activity taking place. Contact the CME and ask them to put the T-Bills on the screen if they're not doing that already.
 
I've been thinking about what you said, but don't quite understand how front-month versus deferred-month ED would be a good proxy for the TED spread. Can you please elaborate?
 
!?!?.........You're back! In a flight-to-quality scenario, you expect people to rush into the front-most months and ignore the deferred months. If the Fed injects liquidity, the yield on shorter-term contracts should collapse, i.e prices skyrocket, while deferreds remain firmer. It should remove some of the flatness/inversion in the yield curve.
 
TED spread trading is documented on the CBOT website.. They at one pt. had a TED spread swap contract trading, don't know about now... check around the CBOT Financial Futures area on their site.
 
Instead of quarterly-listed eurodollars, trade the Fed Funds contract. They have a monthly expiration cycle. Again, the front-most contract months will move the most.
 
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