TED Spread On Watch For Breakout

With news of the failed German bond auction this morning all eyes are on the TED spread.  So far this year we’ve been in the “safe zone” below the highs of 2010.  A breakout above that level would likely signal the deterioration of counterparty trust worldwide.

There are plenty of buying opportunities right now in the market, but everything comes with the caveat of macro headwinds.  Macro headwinds, of course, being code for the disorderly default of an EU member state and a possible breakup of the EU itself.  So far, the TED spread has been creeping up steadily.  I fear that if it breaks out above the 2010 high we could see some market violence.

TED spread YTD:

TED spread 3Y chart:

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