How to visualise a yield curve inversion

The inversion signal

A yield curve inversion — when short-term rates exceed long-term rates — has preceded every US recession since 1970. The 10Y-2Y spread is the most-watched measure.

Building the chart

Using Quadesto's derived column feature, compute [10 Yr] - [2 Yr] from Treasury daily rate data to create the spread series. Quadesto renders it as a time series with a zero line and recession shading.

What to watch

The inversion itself is the warning. The un-inversion — when the curve steepens back to normal — often coincides with the recession starting. The lead time varies from 6 to 24 months.