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. So "TED" came from the initialism of "T-Bill" and "ED""”the ticker symbol for the Eurodollar futures contract. Since the Chicago Mercantile Exchange dropped the T-bill futures, the TED spread has had the current definition.
ted spread - Investment & Finance Definition
The difference between the rate for Treasury bills and the rate for Eurodollar bills. The acronym stands for Treasuries/Eurodollar spread. The TED spread is created by taking simultaneous but opposite positions in both Eurodollar and T-bill futures contracts that have the same maturity. Traders create this spread to bet on the general direction of interest rates. The difference in price is an indicator of credit risk. If the TED spread increases, it indicates increasing credit risk, and if it decreases, it indicates falling credit risk.