Research beginning in the late 1980s documents the empirical regularity that the slope of the yield curve is a reliable predictor of future real economic activity. Today, a substantial body of evidence exists from which various useful stylized facts have emerged.

For example, the difference between 10-year and 3-month Treasury rates, which is normally positive, has turned negative before each of the last eight officially-dated U.S. recessions (see graph below). Remarkably, the yield curve has been flat or inverted before every recession since the 1950s. Most recently, the curve inverted from June to September 2019 and again in February 2020, and on June 8, 2020 the NBER announced the official start of a recession in March 2020. The end of this short but deep recession came only two months later, as identified by the NBER in July 2021.

The links at the top of this page provide more detailed information about:

  • Current and historical estimates of the probability of a recession twelve months ahead.
  • History of real-time use of the yield curve to forecast recessions at the New York Fed.
  • References to selected readings about the yield curve as a leading indicator.
  • Answers to frequently-asked questions (FAQ) about the yield curve and its predictive power for future real economic activity, including recessions. This link contains an extensive list of references to articles and other materials about the yield curve as a leading indicator.