An interesting article in today’s New York Times highlights the extent to which Ben Bernanke, our stalwart captain of monetary policy, is selling QE2 to the political establishment. This article reiterates the deep divide that has developed over QE2, fostered by, among others, Sarah Palin. Our own Bank Innovation member Carl Selmasska has effectively explained the potential shortcomings of QE2.
The TED, which measures the difference between three-month Treasurys and the three-month Libor rate, has shown even more bend since QE2 went live. The TED is about 13.5% tighter to close yesterday at about 15.97 basis points. The TED has taken a wilder ride since mid August, dropping to as low as 13.48 basis points in late September, only to rise to 18.25 just days later.
TED SPREAD
It is important to note that these gains in spreads are coming at the short end of the yield curve, not the long side. Does this mean Ben deserves a pat on the back? It’s probably to soon to give him that. Let’s at least agree that there is no need to slap him upside the head as of now.