Important note. This content is published for educational and statistical purposes. It does not constitute investment advice under AMF / MiFID II regulations. Past performance is not indicative of future results.
What is the Yield Curve?
The Yield Curve measures the difference between long-term interest rates (10-year Treasury) and short-term rates (3-month Treasury). An inverted curve (negative spread) is one of the most reliable recession indicators in modern economic history.
Economic logic
Normally, long rates exceed short rates (upward-sloping curve) because investors demand a premium to lock up money longer. When the curve inverts (short rates > long rates), it signals that:
- The Fed is tightening too much: high short rates reflect restrictive monetary policy
- Slowdown is anticipated: long rates fall as the market prices in a recession
- Credit contracts: banks lose their borrow-short / lend-long margin
Macro ≠ equities
The curve is a macroeconomic cycle indicator, not an equity thermometer. Since 1969, every US recession has been preceded by a 10Y-3M inversion — but not every inversion has led to a recession yet: the record 2022-23 episode remains unresolved as of early 2026.
A positive spread indicates a normal curve. A negative spread signals inversion.
The Yield Curve reads the macro cycle via the 10Y-3M spread. It is neither a standalone equity timing tool nor a guarantee of correction.
How the signal is built
10Y-3M spread calculation
ONELIX subtracts the 3-month Treasury (FRED DGS3MO) from the 10-year Treasury (FRED DGS10). A positive spread indicates a normal curve; a negative spread signals inversion.
Normalization and historical context
To identify significant deviations, ONELIX computes standard deviations of the spread from its historical mean since 1962. This normalization quantifies inversion intensity.
Signal persistence
The model incorporates persistence logic: once the curve inverts, the macro tension signal remains active for a limited period even if the curve temporarily steepens again — reflecting that the economic effects of an inversion persist beyond the event itself. Exact parameters remain proprietary.
ONELIX then builds a normalized indicator from 0 to 100% integrated into the LIX.
The normalization formula and detailed persistence mechanisms are not published. The general logic (10Y-3M spread, z-scores, 0–100% score) is documented.
Historical reading
The chart below presents the raw value of the Yield Curve indicator from 1962 to year-end 2025.
Yield Curve — slope of US Treasuries
Monthly values, January 1962 → December 2025
Sources: 10-year Treasury (FRED DGS10), 3-month Treasury (FRED DGS3MO), ONELIX calculation. Red bands: 15 major corrections tracked in ONELIX.
Inversions and recessions
Since 1969, every US recession has been preceded by a 10Y-3M inversion (average lag 12–18 months). The eight inversions through 2006 were all followed by a recession. The 2022-23 record inversion (−1.9%) has not yet been followed by an official recession — the signal remains an alert, not a certainty.
The ONELIX reading of the Yield Curve
ONELIX reads the Yield Curve as a macro cycle and monetary tension indicator. A high score signals a flat or inverted curve — a context historically associated with slowdowns, not necessarily equity crashes.
The signal becomes more robust when it converges with Interest Rates, credit or volatility.
Across the 15 major corrections (≥ 19%) since 1962, the signal showed clear detection (≥ 75%) in roughly 27% of cases (1980, 2007, 2020, 2025), moderate signal (60–75%) in 27% (1966, 1968, 1998, 2000), and remained weak (< 60%) in 40% — notably 1973, 1987, 1990, 2011, 2018 and 2022. This asymmetry confirms the macro ≠ equities angle.
A high score means the curve is flat or inverted in the ONELIX normalization. This describes an unfavorable context, not a market timing.
Product preview. Frozen historical capture.
In the LIX composite score, the yield curve is combined with rates, credit, valuation, macro cycle and volatility. The ONELIX methodology details the normalization and aggregation logic.
Limits and vigilance points
The Yield Curve remains the most reliable historical recession indicator, but it has important nuances.
- Variable lag: between inversion and recession, the lag ranges from 6 to 24 months
- QE and interventions: quantitative easing programs can distort signals
- Recession ≠ crash: a recession does not guarantee an immediate equity crash
- Technical factors: institutional demand and international flows can influence long rates
- Combined reading: cross-check with rates, credit, valuation and volatility
- Ongoing exception: the 2022-23 inversion has not yet been followed by an official recession
An inverted curve signals macro cycle tension, but provides neither a recession date nor a guarantee of an equity correction.
Explore the Yield Curve in ONELIX
Interactive charts, drawdown statistics, historical zones and dedicated backtest.
Frequently asked questions
What does the Yield Curve measure?
The gap between the 10-year Treasury and the 3-month Treasury (10Y-3M spread), normalized to an ONELIX score of 0–100%. A high score signals a flat or inverted curve.
Why the 10Y-3M spread?
It is the most widely followed measure of curve inversion and its historical correlation with US recessions since 1969.
Are recession and equity crash synonymous?
No. The curve mainly reads the macro cycle. A recession can occur without an immediate equity correction — hence 40% of crashes not detected at the peak.
What are the data sources?
10-year Treasury (FRED DGS10), 3-month Treasury (FRED DGS3MO), proprietary ONELIX calculation (z-scores, persistence, 0–100% normalization).
Does it predict crashes?
No. It informs on the macro cycle and historical frequencies (27% / 27% / 40%), without equity market timing.
Can it be used alone?
No. Cross-check with Interest Rates, high yield spreads, valuation, macro cycle and volatility.