FRBSF Economic Letter: Information in the Yield Curve about Future Recessions

Thomas and I wrote a second Economic Letter about the information in the yield curve for predicting recessions. Here we focus on what different measure of the shape of the yield curve—that is, which yield spread—appears to have the most information. We conclude that the classic 10-year minus 3-month spread is the most useful one. We also discuss the role of the term premium, and how to interpret this evidence. (Correlation is not causation!)

Read the Letter here.

Here is some coverage in the Wall Street Journal.