Yield Curve (2s10s) vs NY Fed Recession Probability
2s10s spread vs NY Fed Recession Probability model — which is more accurate?
One-year comparison
Left axis: NY Fed Recession Prob (green) · Right axis: Yield Curve 2s10s (blue)
The analysis
The NY Fed's recession-probability model is built on the 3m10y yield curve spread, which is closely correlated with 2s10s but slightly more sensitive at cyclical extremes. The NY Fed model converts the spread into a probability, making it easier to communicate than the raw spread. Above 50% probability, it has preceded every recession since 1968. Use the NY Fed model as a compressed, interpretable version of the 2s10s signal.
Track the New York Fed's recession probability model based on the 3-month/10-year Treasury spread. Exceeding 50% has preceded every recession since 1972.
Monitor the 2-year/10-year Treasury yield curve spread in real time. Yield curve inversions have preceded every US recession since 1955.