TED spread

nazz - The problem with the FF contract is that the final settlement is the arithmetic average FF rate over the month, so when we are near month end like now the contract does not move.

ChiBond - I found the article I assume you are referring to:
http://www.cbot.com/cbot/docs/42550.pdf

I need to go over it in more detail to see if I understand it properly but basically the article describes buying a CBOT bond futures, and shorting the appropriate combination of ED contracts. I just need to make sure I know how to calculate this "appropriate" number correctly.

Thanks for sharing your ideas guys.
 
I told you to stay out of the spot contract. You could be "long" the 2nd and 3rd months and "short" other deferreds in order to benefit from the expected movement.
 
The easiest way is to compute the 2yr ED strip and then subtract the 2yr Treasury yield.

Doing front to back ED's is kind of meaningless. Yes a Fed injection will bid the fronts but in a credit risk event scenario ALL bank paper will suffer vs. Treasuries........
 
what nazz suggests is not a proxy for TED spread trading. HE's really just suggesting a curve play. Maybe it makes sense given the scenario you see unfolding, but it is definately a completely different animal than a TED spread.
 
The original TED Spread or T-Bill vs ED has been dead long ago. In its place are the T-Notes vs ED or T-Bonds vs ED.

My question is what is your ultimate goal? If it is to make money in the Financials, then I'll advise you to trade ED - ED Spreads or NOB Spreads. They are easier to trade, simpler to execute and you can make a lot more money if you know what you are doing.

An example of ED - ED Spread is going long on Sept '07 ED and short on June '08 ED. Presently this Spread has reversed.

NOB stands for Notes Over Bond Spread. This means Buying 10-year T-Notes and selling 30-year T-Bonds or vice versa (BON Spread). An example is the December 2007 NOB Spread. This spread has also reversed to the December 2007 BON Spread as of this writing.

I hope this helps.
 
Quote from SupremeTrader:

The original TED Spread or T-Bill vs ED has been dead long ago. In its place are the T-Notes vs ED or T-Bonds vs ED.

My question is what is your ultimate goal? If it is to make money in the Financials, then I'll advise you to trade ED - ED Spreads or NOB Spreads. They are easier to trade, simpler to execute and you can make a lot more money if you know what you are doing.

An example of ED - ED Spread is going long on Sept '07 ED and short on June '08 ED. Presently this Spread has reversed.

NOB stands for Notes Over Bond Spread. This means Buying 10-year T-Notes and selling 30-year T-Bonds or vice versa (BON Spread). An example is the December 2007 NOB Spread. This spread has also reversed to the December 2007 BON Spread as of this writing.

I hope this helps.
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I didn't know the TED spread was limited in scope to T-bills only (I assumed T stood for Treasuries and was referring to this more general case). My intention was to learn how the TED spread can be used to essentially take a short position in liquidity and profit from a downturn in credit markets. Although I'm sure that a lot of money can be made trading the curve "if you know what you are doing", I believe this is the case with any tradable security, and would not be eager to learn about the markets if I thought otherwise.
 
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