Yield curve.
In plain English
The yield curve plots the yields of U.S. Treasury securities from short maturities (1 month, 3 months) to long ones (10 years, 30 years). In normal times, the curve slopes upward: lenders demand more interest to hold money for longer. When the curve inverts (short-term yields rise above long-term ones), it has historically preceded U.S. recessions by about 12 to 18 months, though not every inversion has produced one.
01Why it matters
The 10-year minus 2-year Treasury spread is one of the most-watched single numbers in market forecasting because of its inversion-recession track record. When you see the news reference 'the yield curve inverted,' that is the warning signal being referenced.
02The math, step by step
The 2-year/10-year spread inverted in July 2022 and stayed inverted through early 2024, the longest inversion since the 1980s. A recession had not arrived by mid-2024, which prompted serious debate about whether the indicator's track record was broken or just delayed.
04Receipts
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