Yield Curve Recession Indicator
The yield curve — particularly the 10-year minus 2-year Treasury spread — has preceded every US recession since 1955 by 6-24 months when inverted. This calculator checks current spread against Fed Bank of New York's recession-probability model.
Why Yield Curve Predicts Recession
Short rates reflect current Fed policy. Long rates reflect future economic expectations. When short rates exceed long rates, the bond market is pricing future Fed cuts — which the market only expects if economic deterioration is coming. This forward-looking signal has been one of the most reliable recession indicators in modern macroeconomics.
3M/10Y vs 2Y/10Y
Federal Reserve research (Estrella, Trubin 2006) found the 3-month/10-year spread has the highest predictive power for recessions, slightly outperforming 2Y/10Y. Both signals matter — when both invert simultaneously, the signal strengthens. The Fed's published recession probability model uses 3M/10Y.
Lag Between Inversion And Recession
Inversion does not mean immediate recession. Average lag: 12-18 months from first sustained inversion. The 2019 inversion preceded the COVID recession but was not the cause. The 2022-2023 inversion has had an unusually long lag — explanations include massive fiscal stimulus, labor market tightness, and Fed credibility.
Source: Federal Reserve Bank of New York yield-curve recession probability model. Last updated: May 2026.