TED Spread is the difference between the rate for US Treasury bills and the rate for Eurodollar bills with identical expiration dates.
The difference between these two categories is an indicator of credit risk, because rate associated for Eurodollar bills reflects credit ratings of corporate borrowers, while the US Treasury bills are considered risk-free. The greater the gap between these two measures, the greater the default risk and, vice versa, the smaller the difference, the smaller the default risk.
