{"id":267906,"date":"2025-01-01T02:03:35","date_gmt":"2025-01-01T02:03:35","guid":{"rendered":"https:\/\/michigandigitalnews.com\/index.php\/2025\/01\/01\/year-end-disinversion-bull-or-bear-steepening\/"},"modified":"2025-06-25T17:09:51","modified_gmt":"2025-06-25T17:09:51","slug":"year-end-disinversion-bull-or-bear-steepening","status":"publish","type":"post","link":"https:\/\/michigandigitalnews.com\/index.php\/2025\/01\/01\/year-end-disinversion-bull-or-bear-steepening\/","title":{"rendered":"Year End Disinversion: Bull or Bear Steepening?"},"content":{"rendered":"

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With December 31 data, here\u2019s the picture of term spreads:<\/p>\n

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Figure 1:<\/strong> 10yr-3mo Treasury spread (blue), 10yr-2yr Treasury spread (red), both in %. Source: Federal Reserve via FRED, author\u2019s calculations.<\/em><\/p>\n

Bull or bear steepening in the 10yr-3mo<\/a>? Here\u2019s daily data:<\/p>\n

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Figure 2:<\/strong> Change since June 1, 2024 in 10yr-3mo term spread (bold black), contribution to change from 10 year yield (blue bars), from 3 month yield (tan), all in percentage points. Source: Treasury via FRED, and author\u2019s calculations.<\/em><\/p>\n

It\u2019s the case that the majority of the disinversion since June 1st is due to the short rate falling, not the long rate rising.<\/p>\n

Using a specification incorporating the 3 month change in the spread, a probit model implies 61% probability of recession in 2025M04, compared to 31% using a spread only\u2026<\/p>\n<\/p><\/div>\n

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