Inverted yield curve

What the yield curve is

The US Treasury borrows by selling bills, notes and bonds that come due in anything from a few weeks to 30 years. Their yield is the annual return a buyer locks in. Plot the yields of all maturities on one line, the shortest on the left, and you get the yield curve.

On November 6, 2026 it ran from 4.02% for one month to 5.26% for 30 years. Over the past year the 3-month yield moved +0.26 points and the 10-year +0.75, and the curve went from nearly flat a year ago to upward-sloping.

What “inverted” means

Usually the curve slopes upward: lenders want more for tying their money up longer. It is inverted when short-term yields are above long-term ones — when the government pays more to borrow for three months than for ten years. The usual yardsticks are the 10-year yield minus the 3-month yield, and the 10-year minus the 2-year. Below zero means inverted.

Here are the two extremes since 1990 and the latest curve, on one scale. On the steepest day, May 4, 1992, the 10-year was 3.87 points above the 3-month. On the most inverted, May 4, 2023, the 3-month bill paid 5.26% and the 10-year 3.37%: −1.89 points.

Is the yield curve inverted now?

No. On November 6, 2026 the 10-year minus 3-month spread was +0.67 points (10-year 4.86%, 3-month 4.19%) and the 10-year minus 2-year +0.35 points (2-year 4.51%). The latest inversion of the 10-year and 3-month yields ran from October 18, 2022 to October 16, 2025 — 621 trading days, the longest since 1990 — and was deepest in May 2023, at −1.89 points, the deepest since 1990. It has been over for 386 days.

The two yardsticks usually agree, but not always. The 10-year minus 3-month, the spread the Federal Reserve Bank of New York uses in its recession model, compares long yields with a rate the Fed sets almost directly; the 10-year minus 2-year compares them with where markets expect that rate over the next two years. Since 1990 the first has inverted 7 times and the second 7 times, counting runs less than 90 days apart as one.

Inversions and recessions since 1954

The Treasury's daily curve starts in 1990. For a longer view this article uses the 10-year yield minus the federal funds rate — the overnight rate the Fed steers — as monthly averages since July 1954. It is a stand-in for the slope of the curve, not the same measure; where both exist it moved closely with the 10-year minus 3-month spread (correlation 0.98). It covers 10 recessions with two full years of data before them.

An inversion began in the 24 months before 8 of these 10 recessions, 9 to 21 months ahead (14.5 months in the median case). The recessions of 1957 and 1960 came without one. Inversions in 1966, 1998 and 2022 (4 in all) were not followed by a recession within 2 years. The latest, from August 2025, is less than 2 years old.

From inversion to recession

Each row is one inversion of the 10-year minus fed funds spread, lined up at the month it began. The red bar shows how long it lasted; the dot, when the next recession began. When a recession followed within 2 years, it began 9 to 21 months after the inversion started: a long and uneven lag, so the signal says little about timing.

Why an inversion can come before a recession

A long-term yield reflects what investors expect short-term rates to average over the years ahead, plus a premium for tying money up. When the Fed has raised short rates to cool the economy and investors expect it to cut them later — usually because they expect growth to weaken — long yields can fall below short ones.

An inverted curve also squeezes banks, which pay short-term rates on deposits and earn long-term rates on loans, and that can tighten credit. Both are reasons for caution, not a timetable: the lag has been long and uneven, and the curve has inverted without a recession following.

The inversion of 2022–25 lasted 621 trading days, the longest since 1990. No recession has followed it in the NBER's table so far (checked November 9, 2026).