The TED spread continues to narrow, and that's good. Most of the narrowing from the peak has been due to declining Libor rates, but this week comes a remarkable new development: yields on 3-mo. T-bills have risen. Well, they've only gone up from 1 bps to 9 bps (0.09%), but at least they are no longer hugging zero (or negative, as was the case briefly). I mentioned before that rising bill yields would be an excellent sign that this storm was passing, and now we have the beginnings of that. It's also interesting that bill yields should be rising as the year draws to a close. Year-end window dressing demand for bills is undoubtedly intense this month so perhaps the rise in bill yields is telling us that the demand has been satisfied; panic is subsiding.
If yields rise faster starting next year (Friday) we'll know that is indeed the case. And we should also see risky asset prices rising as well. 2009 could be a very nice year.