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Yield Curve and Predicted GDP Growth

  • Background: The yield curve—which measures the spread between the yields on short- and long-term maturity bonds—is often used to predict recessions.
  • Description: We use past values of the slope of the yield curve and GDP growth to provide predictions of future GDP growth and the probability that the economy will fall into a recession over the next year.
Highlights
  September August July
3-month Treasury bill rate (percent) 1.95 1.96 2.11
10-year Treasury bond rate (percent) 1.80 1.58 2.07
Yield curve slope (basis points) -15 -38 -4
Prediction for GDP growth (percent) 2.1 2.2 2.2
Probability of recession in 1 year (percent) 37.9 44.1 35.4
  • Yield-Curve-Predicted GDP Growth
  • Probability of Recession Calculated from the Yield Curve
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