The TED spread has obviously widened dramatically since we last discussed it. As you can see the short term cost of liquidity is trading at a big premium. As of this morning, the spread was at the highest levels it has touched since the Bear Stearns collapse back in March.
At that time calm was restored rapidly as JP Morgan emerged as a white knight. With no one there to catch Lehman as it fell and the Jury still out on AIG’s condition, we could well see spreads widen further before they come back down.