Demonstrate how you can use a ted treasuryeurodollar spread


Suppose that one day in early April, you observe the following prices on futures contracts maturing in June: 97.65 for Eurodollar and 98.25 for T-Bill. These prices imply three month LIBOR and T-Bill settlement yields of 2.35 percent and 1.75 percent, respectively. You think that over the next quarter the general level of interest rates will rise while the credit spread built into LIBOR will narrow. Demonstrate how you can use a TED (Treasury/Eurodollar) spread, which is a simultaneous long (short) position in a Eurodollar contract and short (long) position in the T-Bill contract, to create a position that will benefit from these views.

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Finance Basics: Demonstrate how you can use a ted treasuryeurodollar spread
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