Recession Probability Model

The Recession Probability Monitor is a BondStats macro indicator based on key US Treasury yield curve signals. It provides an estimated recession probability using the shape of the US Treasury curve, with a focus on the 10Y–3M and 10Y–2Y spreads.

Recession Probability Monitor

The Recession Probability Monitor is a BondStats macro indicator based on key US Treasury yield curve signals. It provides an estimated recession probability using the shape of the Treasury curve, with a focus on the 10Y–3M and 10Y–2Y spreads.

What the Recession Probability Monitor Shows

The US Treasury yield curve is one of the most closely watched indicators in macroeconomics and financial markets. Under normal conditions, longer-term Treasury yields tend to be higher than shorter-term yields. When this relationship flattens or inverts, markets may be signaling weaker growth expectations and a higher probability of future rate cuts.

Because of this, yield curve inversions have historically been monitored as potential recession warning signals.

Main Inputs

The BondStats Recession Probability Monitor is based on two key Treasury yield curve spreads:

10Y–3M Spread

The spread between the 10-year Treasury yield and the 3-month Treasury bill yield is one of the most widely followed recession-related market indicators.

10Y–2Y Spread

The spread between the 10-year Treasury yield and the 2-year Treasury yield is another widely used measure of yield curve shape and macro bond market conditions.

Together, these spreads help indicate whether the Treasury curve is normal, flat, or inverted.

How to Interpret the Signal

A higher estimated recession probability generally reflects a flatter or more inverted Treasury yield curve. A lower estimated recession probability usually reflects a more positive and normally sloped curve.

The indicator should be interpreted as a market-based macro signal rather than a precise forecast. Changes in recession risk depend on a wide range of factors including inflation, central bank policy, labor markets and financial conditions.

Methodology

The Recession Probability Monitor is a BondStats model based on the shape of the US Treasury yield curve. It uses the 10Y–3M and 10Y–2Y spreads as recession-related market signals and assigns greater weight to deeper yield curve inversions.

The model is designed as a simplified macro indicator for monitoring broad recession risk trends over time.

The indicator is provided for informational and educational purposes only. It is not an official forecast and should not be interpreted as investment advice.

Transparency

This section outlines the data inputs, model structure and intended use of this BondStats tool.

Last Updated: March 19, 2026

Data Type: Market reference inputs and BondStats model assumptions

Model Type: Simplified multi-factor analytical framework

Use Case: Informational and educational

Not Intended As: Investment advice, regulatory analysis or official forecasting

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