Yield Curve

When short-term Treasury yields exceed long-term ones (an inverted curve), it has been the most reliable recession warning in modern US history — every recession since the 1970s was preceded by one, typically 6 to 18 months ahead. An inversion reflects bond investors collectively betting the Fed will need to cut rates in response to a slowing economy. If you watch only one leading indicator, this is the standard choice. The 10Y-2Y overlay is the same signal read off a different point on the curve: the 2-year anticipates Fed policy while the 3-month reflects the policy rate already set, so 10Y-2Y tends to invert earlier and less deeply (-1.08% at its July 2023 trough versus -1.89% at 10Y-3M's May 2023 trough). A gap between the two lines is the market pricing cuts the Fed hasn't delivered yet; the primary series drives this card's rating and bands, with 10Y-2Y shown for confirmation.