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Thursday, May 21, 2009

TED spread normalizes, signaling availability of credit

The TED spread, the gap between the two-month London interbank offered rate and the two-month Treasury bill rate, dropped from more than 450 basis points in October to 48 basis points Thursday. The credit-distress barometer's long-term average is roughly 50 basis points. "Over history, it's been quite an interesting predictor of credit crunches. The fact that it's gone down is a positive indicator of credit availability," said James Holtzman, a financial adviser at Legend Financial.

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