2s10s Spread
The yield difference between the 10-year and 2-year U.S. Treasury notes — the most widely cited gauge of yield curve shape and recession risk.
Formula
2s10s Spread = 10-Year Treasury Yield − 2-Year Treasury Yield
The 2s10s spread is calculated as the 10-year Treasury yield minus the 2-year Treasury yield. When positive, the curve is normal (upward sloping). When zero (flat). When negative (inverted) — the 2-year yields more than the 10-year — it has preceded every U.S. recession in the modern era.
The 2-year yield is dominated by near-term Fed policy expectations. The 10-year yield reflects longer-term growth and inflation expectations. The spread is therefore a real-time summary of: how tight is monetary policy vs. how robust are long-run growth expectations.
The deepest inversion since the Volcker era hit -109bp in 2023. Whether the 2s10s inversion leads a recession by 6 months or 24 months is variable — but the direction has proven reliable as a warning signal across economic cycles.
Example
If the 2-year Treasury yields 4.90% and the 10-year yields 4.20%, the 2s10s spread is -70 basis points — inverted. The market is pricing in Fed rate cuts ahead because it expects economic slowdown.
Related Terms
Curve Flattening
When the yield spread between long- and short-term Treasuries narrows — short yields rising faster than long yields, or long yields falling faster.
AdvancedCurve Steepening
When the yield spread between long- and short-term Treasuries widens — usually as long yields rise faster than short yields, or short yields fall faster.
AdvancedInverted Yield Curve
When short-term Treasury yields exceed long-term yields — historically the most reliable leading indicator of U.S. recession.
IntermediateT-Note
U.S. Treasury notes with maturities of 2, 3, 5, 7, or 10 years, paying semi-annual coupon interest — the most widely traded government securities.
IntermediateTerm Premium
The extra yield investors demand to hold longer-term bonds instead of rolling short-term bills — compensation for duration, inflation uncertainty, and supply risk.
AdvancedYield Curve
A graph of Treasury yields across all maturities — from 3 months to 30 years — that maps the term structure of interest rates at a given moment.
Intermediate