US 2Y/10Y Yield Curve Spread (T10Y2Y)
The US 10-year minus 2-year Treasury yield spread (T10Y2Y) from 2000 onwards. The most-watched recession indicator in markets: every US recession since 1955 has been preceded by a sustained inversion of this spread by 12 to 24 months. The 2022-2024 inversion was the longest in recorded history at over two years. Includes zero-line and historical inversion shading. Live FRED data, AUD-trader framing on global recession risk transmission to ASX 200 and AUD.
Chart
10Y minus 2Y spread in percentage points. Below zero = inverted = recession warning. The 2022-2024 episode was the longest inversion in recorded history.
What is the 2Y/10Y spread?
Mechanically: 10Y yield minus 2Y yield, in percentage points. A positive value means long bonds yield more than short bonds (normal upward-sloping curve). A negative value means the inverse (downward-sloping or inverted curve).
The bond market expects, in equilibrium, to be paid more for taking 10 years of duration risk than 2 years. When this expectation reverses, it means the market believes short rates will fall significantly within the next 10 years - which historically happens because the Fed cuts rates in response to recession.
Historical 2Y/10Y inversions and US recessions
| Inversion start | Recession start | Lag | Deepest inversion |
|---|---|---|---|
| Sep 1978 | Jan 1980 | 16 mo | -2.41% |
| Oct 1980 | Jul 1981 | 9 mo | -2.41% |
| Dec 1988 | Jul 1990 | 19 mo | -0.41% |
| Jun 1998 (brief) | No recession | - | -0.05% |
| Feb 2000 | Mar 2001 | 13 mo | -0.50% |
| Dec 2005 | Dec 2007 | 24 mo | -0.19% |
| Aug 2019 (brief) | Feb 2020 (COVID) | 6 mo | -0.04% |
| Jul 2022 | None as of 2026 | 43+ mo and counting | -1.08% |
The 2022-2024 inversion is the only one in the table that has not been followed by a NBER-dated US recession. Some analysts argue the recession risk is still active given typical lags. Others argue the soft-landing thesis is intact and the historical pattern broke for structural reasons (fiscal dominance, COVID-era savings, AI capex).
Trader takeaway
- Inversion alone is not a sell signal. Equity returns in the 12 months AFTER initial inversion have historically been positive (median +10 percent S&P 500). The recession risk crystallises later.
- Re-steepening from inversion is more dangerous. When the curve normalises from inverted back toward zero or above, the Fed has typically already started cutting. The recession often starts within 3-6 months of normalisation. Watch the 2024 normalisation closely.
- BTC AUD reaction. BTC has shown mixed behaviour through inversions: 2007-2008 inversion preceded the early BTC era; 2019 inversion preceded the March 2020 COVID crash AND the subsequent 10x bull market; 2022 inversion coincided with the BTC bear and 2024-2026 recovery.
- AUD/USD reaction. AUD/USD tends to weaken when US recession fears intensify (USD safe-haven bid) and recover as cuts arrive. Position size accordingly.
Methodology
- Source. FRED series T10Y2Y (computed by FRED as DGS10 minus DGS2 daily).
- Endpoint. Public fredgraph.csv.
- Recession shading. NBER-dated US recessions.
- Zero line. Threshold marker for inversion vs normal.
- Static-first. Snapshot preserved if FRED unreachable.
Related tools
- 10Y Treasury Yield - the long-end input.
- 2Y Treasury Yield - the short-end input.
- Fed Funds Rate - the policy lever.
- US Unemployment Rate - the labour-market recession indicator.
Frequently asked questions
It is the difference between the 10-year US Treasury yield and the 2-year US Treasury yield. Normally positive (long bonds yield more than short bonds because of term premium and growth expectations). Occasionally negative ('inverted'), meaning short rates exceed long rates - which has historically signalled that the Fed has tightened policy enough to slow the economy meaningfully. FRED publishes the spread directly as T10Y2Y.
The bond market is forward-looking. When the Fed has hiked aggressively, the 2Y reflects current restrictive policy at face value; the 10Y reflects the average expected short rate over 10 years. If the 10 is below the 2, the market is pricing the Fed cutting rates significantly within the next decade - which happens in response to a recession. Every US recession since 1955 (10 of them) has been preceded by a 2Y/10Y inversion. The inversion-to-recession lag has ranged from 7 to 30 months, averaging about 16 months.
Not yet as of 2026. The 2022-2024 inversion was the longest in recorded history (over 24 months continuously) and the deepest in 40 years (minus 1.08 percent at peak). The US economy avoided technical recession through the period, defying historical precedent. Two leading explanations: (a) fiscal stimulus (CHIPS Act, Inflation Reduction Act, Infrastructure Act) offset monetary tightening; (b) the Fed managed the soft-landing successfully. The yield curve un-inverted in late 2024 but the recession risk is not necessarily eliminated - some past episodes had the recession start AFTER the curve normalised.
Through global recession-risk transmission. A US recession typically drags AU GDP growth by 0.5-1.0 percentage points within 12 months. AUD/USD weakens on USD safe-haven flows in a US recession. ASX 200 typically follows the S&P 500 with a 0.7-0.8 beta in risk-off episodes. BTC AUD usually capitulates during US recession onset (March 2020, late 2022) before recovering on subsequent Fed easing. Watching the US curve is one of the highest-information macro signals for AU-resident portfolio construction.
Yes. The 3-month / 10-year (T10Y3M) is preferred by some Fed researchers because the 3-month is a closer proxy to Fed policy than the 2Y. The 3M/10Y curve also inverted in 2022 and signalled the same recession risk. The Fed's NY-research probit model uses 3M/10Y. Markets watch the 2Y/10Y more because it is easier to trade and more liquid. Both curves carry the same fundamental signal.
FRED series T10Y2Y, which is computed by FRED as DGS10 minus DGS2 daily. Available from June 1976. This chart starts from 2000 to focus on the modern Fed regime.
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