The page behind this dialog is live. Create a free account or sign in and you'll land right back on it.
The Fed's preferred recession signal
The 10Y-3M spread is the yield curve measure favored by the Federal Reserve's own research. It has a slightly better track record than 10Y-2Y, with zero false positives 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.
Unlike the 10Y-2Y (one false positive in 1998), the 10Y-3M has correctly predicted every recession since 1968 with no false alarms. The Fed uses this variant in its own probability models.
Because the 3-month T-bill tracks the Fed Funds rate closely, inversion of 10Y-3M directly reflects the market's view that the Fed is too tight relative to future growth expectations.
A brief, shallow inversion (1998-type if it occurred) suggests a soft landing is possible. A deep, prolonged inversion (2006-07, 2022-24) suggests more significant economic slowing.
Respect the track record — no false alarms since 1968 — but let depth and duration set your urgency, since shallow, brief inversions have pointed to milder outcomes than deep, prolonged ones. Preparation beats exit here: confirm near-term spending doesn't depend on selling stocks, and hold equity targets steady while the long lag plays out.