Yield curve (10y–2y)
The gap between 10-year and 2-year Treasury yields.
The Yield curve (10y–2y) is 0.35pp as of July 8, 2026 — 0.5 standard deviations below its historical mean of 0.85, a Caution reading.
Historical crashes marked on this chart (4)
The dashed red lines flag major US market crashes within this indicator’s history. Here is what happened at each and what followed.
- Black Monday (1987)
- On October 19, 1987 the Dow fell 22.6% in a single day — the worst one-day drop in history — driven partly by program trading. The economy avoided recession and markets recovered within two years.
- Dot-com crash (2000)
- The tech bubble burst in March 2000; the Nasdaq lost about 78% by 2002 as internet valuations collapsed. A mild recession followed and tech stocks took roughly 15 years to reclaim their peak.
- Global Financial Crisis (2008)
- The subprime mortgage meltdown and Lehman Brothers' collapse cut the S&P 500 about 57% into March 2009. It triggered the Great Recession, sweeping bailouts, and a decade of near-zero interest rates.
- COVID crash (2020)
- Pandemic lockdowns caused the fastest bear market ever in February–March 2020, a roughly 34% plunge in weeks. Unprecedented Fed and fiscal stimulus sparked a rapid recovery to new highs.
Overview
The 10-year minus 2-year Treasury yield spread is the most reliable recession lead indicator on record. It measures the gap between long-term and short-term US government borrowing costs. Normally long-term yields are higher, giving a positive spread; when the curve inverts and the spread goes negative, a recession has historically followed — usually 6 to 24 months later, often after the curve un-inverts rather than during the inversion itself. It has preceded every US recession since the 1970s and was inverted from 2022 into 2024.
How to read it
A positive spread is the normal, healthy state: investors earn more for lending longer. When the spread turns negative (the curve inverts), short-term yields exceed long-term ones — a signal that markets expect rate cuts and slower growth ahead. Deep or sustained inversions are the warning; the recession usually follows with a long, variable lag.
How it's calculated
- The spread is published daily by the Federal Reserve as the difference between the 10-year and 2-year Treasury constant-maturity yields.
- We store the daily value (in percentage points).
- A deeply negative spread is treated as a warning signal.
Criticisms
- The lead time between inversion and recession is long and variable.
- It is a recession signal, not a direct measure of stock valuation.
Frequently asked questions
- What does an inverted yield curve mean?
- A positive spread (long-term yields above short-term) is normal and healthy. A negative spread — an inverted yield curve — has preceded every US recession since the 1970s and is the classic warning sign.
- How long after inversion does a recession start?
- Historically, recession tends to arrive 6 to 24 months after the curve inverts — and often only once the curve un-inverts back to positive. The lead time is long and variable, so inversion is a warning, not a countdown.
- When was the yield curve last inverted?
- The 10y–2y spread inverted in mid-2022 and stayed negative into 2024, one of the longest inversions on record, before turning positive again.