10-Year U.S. Treasury Minus 3-Month U.S. Treasury

The difference between the 10-year U.S. treasury and the 3-month U.S treasury is known as another good forward-looking economic indicator. In a normalized bond market, the yield on longer-duration bonds is expected to be higher than that of shorter-duration bonds. However, when the shorter duration bonds (3-month) have higher yields than the longer duration bonds (10-year), the spread between the two turns negative a recession often follows. Notice how the spread in the chart above tends to turn negative before the grey-shaded areas, which indicate a recession.

The chart is interactive. There is also a sliding scale below the graph so you can isolate various time periods.