The spread between long and short government bond yields
Long yields minus short yields. When short rates exceed long ones the curve is inverted, which has preceded most recessions.
Government bonds of different maturities normally yield more the longer they run, because lenders want compensation for tying money up. When markets expect the central bank to cut rates because the economy is weakening, long yields fall below short ones and the curve inverts.
In the United States an inversion of the ten-year minus three-month spread, sustained for a quarter, preceded every recession from 1969 to 2020 with a lead of six to eighteen months. The inversion of October 2022 to December 2024, the longest on record, had not been followed by a recession as of September 2026. The curve usually re-steepens before the recession arrives, so worldstat.us moves the indicator to Post-trigger rather than Normal when it un-inverts. Other regions use the closest available short rate as the short end.
On this site
- 10y–3m spread China +0.20 pp Context
- 10y–3m spread, AAA curve Eurozone +0.80 pp Normal
- 10y–2y JGB spread Japan +0.94 pp Normal
- 10y gilt minus Bank Rate United Kingdom +1.56 pp Normal
- 10y–3m spread United States +0.78 pp Normal
Related terms
Sources
- Estrella, A. and Mishkin, F. (1996), The yield curve as a predictor of U.S. recessions, Federal Reserve Bank of New York Current Issues 2(7)
- Federal Reserve Bank of New York, The yield curve as a leading indicator: frequently asked questions
- Estrella, A. and Hardouvelis, G. (1991), The term structure as a predictor of real economic activity, Journal of Finance 46(2)
- Wikipedia, Inverted yield curve