Since it's the obvious objection : the inversion to recession relationship is an observed regularity and not a mechanism.
The lead times have varied a lot : the 2006 inversion preceeded the Great Recession by about 17 months while the 2019 inversion was followed much quickly by a recession. Recession was ultimately triggered by the pandemic more than by the curve.
The choice of the spread is important too. In 2019 the 10y–3m inverted clearly while the 10y–2y stayed only smally negative for a short period.
This animation simply lets watch the full Treasury curve evolution month by month and see how inversions appeared before modern US recessions.
Data : monthly Treasury yields from 3m to 30y (Fed H15 via FRED) with NBER recession dates with CSV download included.
Everything is hand rolled SVG and vanilla JavaScript with no charting libraries.
Since it's the obvious objection : the inversion to recession relationship is an observed regularity and not a mechanism.
The lead times have varied a lot : the 2006 inversion preceeded the Great Recession by about 17 months while the 2019 inversion was followed much quickly by a recession. Recession was ultimately triggered by the pandemic more than by the curve.
The choice of the spread is important too. In 2019 the 10y–3m inverted clearly while the 10y–2y stayed only smally negative for a short period.
This animation simply lets watch the full Treasury curve evolution month by month and see how inversions appeared before modern US recessions.
Data : monthly Treasury yields from 3m to 30y (Fed H15 via FRED) with NBER recession dates with CSV download included.
Everything is hand rolled SVG and vanilla JavaScript with no charting libraries.