Yield Curve Inverts (10Y - 2Y)
The most-watched recession indicator
The 10Y-2Y Treasury spread turning negative has preceded every US recession since 1969 with only one false positive (1998). The lag between inversion and recession onset has ranged from 6 to 24 months.
| Date | 1M return | 1Y return | 5Y return |
|---|---|---|---|
| 1978-08-18 | -2.1% | +3.4% | +54.8% |
| 1980-09-12 | +5.2% | -3.9% | +49.9% |
| 1981-10-27 | +4.0% | +12.7% | +97.7% |
| 1988-12-13 | +2.7% | +27.3% | +68.9% |
| 1990-03-08 | -0.1% | +10.5% | +42.6% |
| 1998-05-26 | +3.5% | +17.4% | -11.9% |
| 2000-02-02 | +0.0% | -2.5% | -14.7% |
| 2005-12-27 | +2.2% | +13.6% | +0.3% |
| 2007-05-03 | +2.5% | -5.9% | -6.7% |
| 2019-08-27 | +3.8% | +21.3% | +94.9% |
| 2022-04-01 | -8.2% | -9.8% | — |
| 2024-09-03 | +3.3% |
What history says
Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.
Every recession was preceded by inversion, but not every inversion leads to recession (1998 was a false positive). The base rate is roughly 85% — high but not certain.
The median lag between first inversion and recession onset is approximately 14 months. Equities have typically rallied 10-15% AFTER the inversion before eventually declining.
Historically, the recession tends to begin after the curve UN-inverts (steepens back to positive), not while it remains inverted. The un-inversion is the more actionable signal.
Selling at inversion has historically meant missing 6-18 months of gains. The correct response is to review fixed income duration and stress-test portfolio resilience.
First inversion is a planning signal with a long fuse — equities have typically kept rising for months afterward — so use the window to review fixed-income duration and stress-test how the full portfolio would behave in a recession scenario, rather than cutting equity exposure the day the spread turns negative.