TSO (formerly TED Spread*) Indicator Chart

This chart shows the TSO Spread, in relation to the S&P 500.  The TSO (T-Bill, Sterling Overnight) Spread is the difference between the SONIA (Sterling Overnight Index Average) and the 3 Month Treasury Bill.  The Sterling Overnight is Europe's equivalent to the United States' Federal Funds Rate.  A rising TSO spread is a bearish indicator, as it is evidence that liquidity is being withdrawn from the financial markets.  A high TSO Spread indicates higher perceived risk in lending, as interbank rates rise against risk-free treasury rates, and is generally a bearish signal, a leading indicator, in market timing systems.

*The TED Spread was the difference between the LIBOR (London Interbank Offered Rate) and the 3 Month US Treasury Bill.  However, the LIBOR was discontinued in 2021.   The SONIA is a suitable replacement for this study.

NOTE: In the chart above, TSO Spread values before 1997 are based on the LIBOR, while values after 1997 are based on the SONIA.