Macro Predictive Metric
The 10-Year minus 2-Year Treasury spread (T10Y2Y) has inverted prior to every recession in modern economic history with a median lead time of 14.2 months.
1. Treasury Yield Curve Mechanics (2Y / 10Y Spreads)
Normal yield curves slope upward to compensate investors for duration risk. When monetary tightening drives short rates above long-term economic growth expectations, the curve inverts, signaling imminent credit tightening across commercial banks.
2. CPI Inflation Components & Wage Beta
Analyzing sticky inflation components (Shelter, Core Services ex-Housing) provides institutional market participants with clearer forward trajectory than headline volatile energy metrics.