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The Fed's own preferred recession model input
The 10Y-3M spread is the basis for the New York Fed's recession probability model. When this measure inverts, the NY Fed model typically shows recession probability above 30%, a level that has preceded every recession since 1968.
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.
The NY Fed's model translates the 10Y-3M spread into a recession probability. Readings above 30% have preceded every recession. This is publicly available and updated monthly.
The NY Fed model estimates recession probability 12 months ahead. A high reading today says 'recession within 12 months is likely,' not 'recession is happening now.'
The 10Y-3M remained inverted for over 24 months in 2022-24, the longest inversion on record. This has tested the model's patience — either a recession is delayed, or the relationship has changed.
A model built around a 12-month lead hands you 12 months of preparation: consider rebuilding cash reserves, upgrading bond credit quality, and writing down — in advance — what you will and won't do if a recession arrives. None of that requires selling equities, which have historically kept rising well after this signal first appears.