That\u2019s the title of a GJ Collins<\/a> article on SeekingAlpha today \u2014 but it\u2019s not what you think it means\u2026<\/p>\n The resolution of the inverted 10-year and 3-month yield curve usually signals a recession down range.<\/p>\n<\/blockquote>\n Well if inversions precede recessions, than this kind of makes sense, although the question is then how much do dis-inversions precede recessions (or do they occur during the recession).<\/p>\n To evaluate this formally, consider the 10yr-3mo term spread from 1960 onward.<\/p>\n Figure 1:<\/strong> 10yr-3mo Treasury term spread, % (blue). NBER defined peak-to-trough recession dates shaded gray. Green arrows indicate events consistent with disinversion signal. Red arrows indicate events not consistent. Source: Treasury via FRED, NBER, and author\u2019s calculations.<\/em><\/p>\n I create a disinversion dummy taking on a value of 1 in the first month the spread is positive after being in the negative range.\u00a0<\/em>Hence, increases in the spread when no inversion has taken place do not register a 1 value for the dummy.<\/p>\n The maximal pseudo-R2<\/sup> is obtained for a spread of 4 months, over the 1960-2024 period (assuming no recession took place in 2024) is about 0.023.\u00a0 Using this specification (a probit on a binary dummy) yields these recession probabilities.<\/p>\n\n
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