This is out of my realm of normal work, but I’ve recently been tagged as the “Bloomberg Guy” with dozens of random requests of the past 4-6 weeks. I could use a little help charting TED spread on Bloomberg. As I understand, this is the spread between treasuries and Eurodollars (i.e., LIBOR). Couple of questions on this: 1) Do I graph the spread as Treasuries - LIBOR? This obviously yields a negative spread under current market conditions. Is that corect? 2) What is industry standard? 6-mo rates for each of these? 3) Anything else I should be aware of? Many thanks in advance, RG
3-month is standard
I would graph LIBOR minus treasuries because positive numbers are better than negative numbers. More virile. That kind of thing. I like 3-month also, but 6 month is pretty interesting these days too. That “under current market conditions” above is something like “always” unless there is something very weird afoot that I can’t even think of now (like would there ever be a reason to keep your money in bank deposits overseas than T-bills in the US if the interest rates were the same? don’t think so).
Make yourself a CIX (custom index), go to CIX and make a new one. Chose 1 to make a new, then 2 to chose a spread. Chose the implied yield of a front month ED future (ED1 )… so when it asks, choose to use yield. The equation would look like YIELD[ED1] - YIELD[GB3 Govt], or something to that effect… that way you can go back in history rolling generic front month EDs and 3mo Bills, run technicals, etc. To graph a CIX just hit period (.) before whatever you named it and use the function.
I re-read your question. Sorry, you didnt want instructions. Rather, what the spread is typically measuring. Sorry about that. You probably knew all that already.
if measuring against longer dated treasuries, 2yr+ I would use swap curve (3M LIBOR) vs treasury curve
Thank you friends.