copies of the U. S. Constitution

As some may recall, there is an inversion in short-term T-bills, i.e, between the 2 and 3 year; however, the 3 year was discontinued last fall, but remains in circulation nonetheless. Thus, when looking at TED with a geometric substitution of The LIBOR versus the historic “normalcy” of the 3 year inflation trend, IMHO, there is a distortion of rate reality:

The 2 year bond rate is @ 1.72

The 3 year bond rate is @ 1.60

Three-month sterling LIBOR, the interest rate off which our mortgages and most other loans are priced, has risen to 6%, its highest level since December 28.

Re: Initially, the TED spread was the difference between the interest rate for the three month U.S. Treasuries contract and three month Eurodollars contract as represented by the London Inter Bank Offered Rate (LIBOR). However, since the Chicago Mercantile Exchange dropped the T-bill futures, the TED spread is now calculated as the difference between the T-bill interest rate and LIBOR. The TED spread is a measure of liquidity and shows the flow of dollars into and out of the United States.

http://blogs.wsj.com/deals/2008/…ns/? mod=WSJBlog

People still wonder whether the Federal Reserve and the Treasury forced J.P. Morgan to offer $2 a share. Yves Smith at Naked Capitalism scoffs at the idea that regulators twisted Jamie Dimon’s arm, such a suggestion “is pretty outrageous spin when the government is putting up taxpayer money.” And he makes a pretty good argument as to why he think that wasn’t the case. Smith also endorses an Institutional Risk Analytics article that says that J.P. Morgan isn’t so financially strong after all. (So there).