3-mo TED spread balloons to almost 500 basis points

LONDON, Sept 18 (Reuters) - The difference between borrowing three-month dollars on the interbank market and the U.S. Treasury's three-month borrowing costs widened dramatically on Thursday to nearly five full percentage points. That was despite coordinated action from the world's major central banks to provide up to $180 billion of dollar liquidity to frozen international money markets. The action helped to briefly bring down overnight term interbank dollar lending rates toward the Federal Reserve's 2 percent target rate but the cost of borrwing three-month funds continued to rise to almost 5 percent USD3MD=.

With three-month T-bill yields collapsing to almost zero this week amid investors' flight to safety amid the deepening financial crisis, the closely-watched 'TED' spread widened to around 490 basis points on Thursday USD3MD= US3MT=RR, Reuters charts showed.

That's more than double the highest points at any time during the 13-month financial crisis and the highest in several years.