2-10-year Treasury spread not as predictive of recessions as short-term spreads

The Treasury 2-10-year spread is often used by market participants as a predictor of recessions. The spreads inverted and a recession is coming. Unfortunately, the evidence does not support this view. A better predictor is the short-term spreads; the 18-month to 3-month spread. See (Don't Fear) The Yield Curve, Reprise.

The Fed researchers show there is a great divergence between the 2-10 spread and the short-term spread. The short-term spread has further steepened while the 2-10 has flattened. There may be an expectations component in this longer maturity spread, but it unlikely to be a recession.