// LIGHTHOUSE · YIELD CURVE

The Yield Curve, Today

Live US Treasury yields across maturities, the historical record of inversions, and what each shape has signalled. Plain English. Primary sources.

Current Reading
Normal-shaped, mildly steepening
The curve un-inverted in late 2024 after the longest inversion on record. Today the 10Y-2Y spread is positive at roughly +0.54 percentage points. Historically every US recession since 1980 has begun after un-inversion — so this is the period to watch most carefully, not the inversion itself. Bull vs bear steepening — what kind is happening now →

The 10-Year yield, the market's benchmark

The single most-watched Treasury yield. It's the base rate for global capital, the discount rate for equity valuations, and the reference point for mortgages and corporate borrowing. Watch its level and direction — both matter.

Data: 10-Year Treasury Constant Maturity Rate via FRED:DGS10. Weekly intervals.

The 10Y minus 2Y spread, over time

The most-watched yield curve indicator. When this line dips below zero, the curve is inverted. Every recession since 1980 has started after the line crossed back above zero — that's the un-inversion signal.

Data: FRED:T10Y2Y. Weekly intervals. Negative values = inverted curve.

Key Pattern
Every US recession since 1955 was preceded by an inverted yield curve. But recessions don't start at inversion — they start after un-inversion, when the Fed begins cutting short rates. The 2007 inversion led to recession in late 2008 (15 months later). The 2019 inversion led to recession in March 2020 (8 months later). The 2022-2024 inversion was the longest on record and un-inverted in late 2024.

Historical inversions and what followed

Each row is a documented yield curve inversion, when it un-inverted, and what happened to the economy and markets afterwards. Source: FRED T10Y2Y series; NBER recession dates.

Inversion Started Un-inverted Recession Began Lag to Recession What Followed
Aug 1978 May 1980 Jan 1980 17 months Volcker tightening, brief recession
Sep 1980 Oct 1981 Jul 1981 10 months Deep early-80s recession, unemployment to 10.8%
Dec 1988 Jun 1989 Jul 1990 19 months S&L crisis, mild recession
Feb 2000 Dec 2000 Mar 2001 13 months Dot-com bust, S&P -49% from peak
Jan 2006 May 2007 Dec 2007 23 months GFC, S&P -57% from peak, banking crisis
Aug 2019 Oct 2019 Feb 2020 6 months COVID recession (exogenous shock accelerated it)
Jul 2022 Sep 2024 — Watching Longest inversion on record; un-inverted late 2024

The four types of curve move

"The curve is steepening" alone tells you nothing. Bull steepening is what you want. Bear steepening is what you fear. Both look the same on a simple chart but mean opposite things. The four possible moves:

// Bull Steepening
The good steepening
Short rates fall faster than long rates. Usually because the Fed is cutting aggressively while long-term inflation expectations stay anchored. The front end drops; the back end barely moves.
When: Early Fed easing cycles, recession-coincident
Watch for: Equity bullish eventually, recession risk near-term
// Bear Steepening
The bad steepening
Long rates rise faster than short rates. The bond market is demanding more compensation for long-term inflation risk or fiscal risk (deficits, debasement). This is what "bond vigilantes" do.
When: 2023 long-end selloff, August 2024 BoJ wobble
Watch for: Risk-off everything — stocks, bonds, gold can all fall together
// Bull Flattening
Growth fear flattening
Long rates fall faster than short rates. Growth expectations are deteriorating, investors flock to long-duration safety. Curve flattens or starts inverting from the long end down.
When: Late-cycle, pre-recession warning
Watch for: Slowing growth data, equity multiple compression
// Bear Flattening
Fed tightening flattening
Short rates rise faster than long rates. The classic Fed hiking cycle — front end gets pulled up while the long end barely moves or actually falls. 2022-2023 was textbook bear flattening into inversion.
When: Active Fed tightening cycles
Watch for: Inversion if short rates exceed long rates
Right now: The curve un-inverted in late 2024 and is mildly steepening. The critical question macro analysts are debating is which type of steepening this is. If short rates are falling faster (bull steepening), the Fed is responding to weakness. If long rates are rising faster (bear steepening), the market is pricing fiscal or inflation risk. Watch the 2Y and 10Y separately, not just the spread between them.

How to read this

An inverted curve isn't the recession. It's the warning. The Fed is holding short rates high to fight inflation; long-term investors don't believe the high rates will last because they expect a slowdown to force cuts. That gap between Fed reality and market expectations is the inversion.

Un-inversion is the trigger. When the Fed starts cutting, short rates fall faster than long rates. The curve normalises. But it normalises because the economy is weakening enough to force cuts. Every recession since 1980 began during or just after this normalisation phase, not during the inversion itself.

The current cycle is unusual. The 2022-2024 inversion lasted longer than any in modern history without a recession arriving. It un-inverted in late 2024. By the historical pattern, this is the watch window — when the Fed cuts and credit conditions start to actually transmit weakness into the real economy.

What to watch alongside the curve: credit spreads (the corporate bond market's view of risk), unemployment claims (the first hard signal of softening), and Fed communications. The yield curve tells you the warning is on; the other indicators tell you when it's translating into something real.

Read the full article →
A 12-minute plain-English deep dive on what the curve is, how it works, and how to read it.