3-Month/10-Year Spread

The 3-month/10-year spread (3m10y) is the yield difference between the 10-year Treasury note and the 3-month Treasury bill. The Federal Reserve Bank of New York uses this specific spread as its primary recession probability indicator.

The 3m10y spread differs from the 2s10s in important ways:

• The 3-month bill is tightly anchored to the current Fed funds rate, making it a cleaner proxy for current monetary policy stance
• The 2-year note embeds 24 months of rate expectations, adding a forward-looking component that the 3-month bill lacks
• The 3m10y therefore captures the gap between current policy and long-term equilibrium, while the 2s10s captures the gap between near-term and long-term expectations

The New York Fed's recession model, based on research by Estrella and Mishkin, uses the 3m10y spread to generate a probability of recession 12 months ahead. When this spread inverts (turns negative), the model's recession probability rises sharply.

Historical behavior:

• Normal range: +100 to +350 bps
• Pre-recession inversion: typically inverts 6-18 months before a recession
• 2023 extreme: reached approximately -189 bps in May 2023, the deepest inversion in decades

The 3m10y is available as a spread page at /spreads/3m10y and in the slopes charting tool.