Yield curve: the spread between 10-year and 2-year US Treasury yields
The curve compares what the government pays to borrow for ten years and for two. Normally the long yield is higher. When it drops below the short one the curve is inverted, and the bond market is saying it expects rate cuts, which means a slowing economy. It happened before every US recession since 1978.
History since 1976
What it says today
The normal state: borrowing longer costs more. 32 % of the history sits at or below today's value.
Short yields well above long ones. The market expects the Fed to cut sharply.
The curve is upside down. It happened before every recession since 1978, usually a year or two ahead.
Long and short yields nearly equal. The market is unsure where the economy is heading.
The normal state: borrowing longer costs more.
A wide gap between long and short yields. Typical after a recession, when the Fed holds rates low.
Where it stood at key moments
| Moment | Value | Band |
|---|---|---|
| Dot-com bubble peak (March 2000) | -0.44 pp | Inversion |
| Post-bubble low (October 2002) | 1.89 pp | Steep |
| Pre-crisis peak (October 2007) | 0.52 pp | Normal slope |
| Financial crisis low (March 2009) | 1.93 pp | Steep |
| Covid crash low (March 2020) | 0.48 pp | Normal slope |
| Bear market low (October 2022) | -0.37 pp | Inversion |
| Today | 0.33 pp | Normal slope |
What it measures
The two-year yield tracks expectations for Fed rates over the next two years. The ten-year yield adds expectations for growth, inflation and a premium for time. The spread is the most watched measure of the curve's slope; FRED has published it daily since 1976 as series T10Y2Y.
Inversions preceded the recessions of 1980, 1981, 1990, 2001, 2008 and 2020. The deepest was in 1980 at more than -2 percentage points; in July 2023 it reached -1.08. The inversion that began in July 2022 lasted over two years, the longest in the data.
How to read it
The signal is the inversion, not its depth. A recession usually follows 6 to 24 months later and often only after the curve steepens again, because the Fed starts cutting short rates faster than long yields fall. The re-steepening after an inversion is therefore the worse news.
Stocks do not suffer from an inversion in the short run. From inversion to the market peak historically took over a year on average, and the S&P 500 usually rose in between. Whoever sold on the inversion of August 2019 missed a 20 % rally into February 2020.
When it failed
The 2022 inversion is the longest on record and the recession it was meant to announce did not arrive in the usual window; the US economy grew more than 2 % a year even in 2024. Explanations vary: excess pandemic savings, the fiscal deficit, long fixed-rate mortgages that never passed higher rates on to households.
Central bank purchases of long bonds after 2008 pushed long yields down and flattened the curve regardless of the economy. The 2019 inversion was followed by a recession, but the pandemic caused it, not the cycle the curve saw.
How to read market indicators
The seven indicators in the Indicators section say how expensive, frightened or tired the market as a whole is. What the bands mean, why none of them times the market, and how to combine them with the Fair Price Index.
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About Bulios BlackMethod and source
- Source: US Treasury yields per the US Department of the Treasury, via FRED (series T10Y2Y, DGS10, DGS2).
- Value = 10-year yield minus 2-year yield, in percentage points, daily.
- The bands are inverted: a deep inversion is level 5 (stress), a steep curve level 1 (calm).
Source: US Treasury via FRED (Federal Reserve Bank of St. Louis) · Updated September 16, 2026
Frequently asked questions
Other indicators
The indicators describe the market as a whole from public data. They say where the market stands against its history, not what it does next month, and each of them has failed before. They are not investment advice. Learn more