Markets watch the gap between long- and short-term Treasury yields closely — when short-term yields exceed long-term yields, the curve “inverts,” a pattern many economists treat as a historically reliable recession warning.
How it works
Subtracting the short-term yield from the long-term yield gives the spread; a negative spread means the curve is inverted.
What this does not include
This does not include the timing or reliability of the inversion signal itself — historically, recessions have followed inversions with a lag ranging from several months to over a year, and not every inversion has been followed by a recession.
How to use this calculator
- Enter the long-term and short-term Treasury yields.
A worked example
Long-term yield 4.2%, short-term yield 4.5%: spread = 4.2 − 4.5 = −0.3% — an inverted yield curve, historically associated with recession risk.
Long-term yield 4.5%, short-term yield 4.2%: spread = +0.3% — a normal, upward-sloping curve.
What the variables mean
| Variable | Meaning |
|---|---|
| Long-term yield | Yield on longer-maturity bonds |
| Short-term yield | Yield on shorter-maturity bonds |
Edge cases worth knowing
A negative spread means the curve is inverted — short-term rates exceeding long-term rates, historically one of the most closely watched recession indicators, though not a guarantee of one.
A negative yield input has no meaning for a standard yield curve, so the calculator declines to show a result for that case.
Frequently asked questions
Why is the 10-year/2-year spread the most commonly cited?
It’s a widely tracked, long-history series that many economists and the Federal Reserve itself reference frequently, though other spreads (like 10-year/3-month) are also watched.
Why would short-term yields ever exceed long-term yields?
Typically when markets expect the Fed to cut rates in the future, pulling down expected future short-term rates — investors are willing to accept a lower yield now to lock in today’s rate for longer.
Does an inverted curve guarantee a recession?
No — it’s a historically strong statistical signal, not a certainty; some inversions have preceded slowdowns without a full recession, and the lag time varies considerably.
