10Y-3M Spread vs 10Y-2Y Spread
The T10Y3M spread closed at 63 basis points and the T10Y2Y spread at 53 basis points on April 24, 2026 (10Y at 4.31 percent, 3M at 3.68 percent, 2Y at 3.78 percent). The pair compares the two most-watched Treasury yield-curve recession indicators: T10Y3M (NY Fed and Cleveland Fed model) and T10Y2Y (market and media favorite).
Also known as: 10Y-3M Yield Spread (10y 3m spread) · 10Y-2Y Yield Spread (yield curve, yield spread, 10-2 spread, 2s10s)
Why This Comparison Matters
The T10Y3M spread closed at 63 basis points and the T10Y2Y spread at 53 basis points on April 24, 2026 (10Y at 4.31 percent, 3M at 3.68 percent, 2Y at 3.78 percent). The pair compares the two most-watched Treasury yield-curve recession indicators: T10Y3M (NY Fed and Cleveland Fed model) and T10Y2Y (market and media favorite). The 10 basis-point T10Y3M-minus-T10Y2Y gap is positive, indicating 3M sits below 2Y. This is the classic late-easing-cycle configuration: the 3M tracks fed funds (now declining), while the 2Y averages expected fed funds over the next 24 months. When markets expect further cuts beyond the next 3 months, 2Y trades above 3M and T10Y3M is steeper than T10Y2Y.
The April 2026 Configuration
Three readings define the April 2026 setup. T10Y3M at 63 bps: 10Y minus 3M, the NY Fed recession-model spread. T10Y2Y at 53 bps: 10Y minus 2Y, the market-favorite recession-signal spread. The 10 bp gap (T10Y3M minus T10Y2Y equals 63 minus 53) reflects 2Y at 3.78 percent sitting 10 bps above 3M at 3.68 percent.
The configuration is consistent with late-easing-cycle pricing. The 3M has fallen to 3.68 percent matching the 200 bps of cumulative Fed cuts since September 2024. The 2Y at 3.78 percent prices in essentially flat fed funds over the next 24 months: market view is that the Fed pause is durable but there is modest risk of another cut over 12-24 months. The 10 bp positive gap reflects that small remaining cut probability.
Why the Two Spreads Move Differently
T10Y2Y reflects expectations of Fed policy 0 to 24 months out, with 2Y essentially equal to the average expected fed funds rate over the next 24 months. T10Y3M reflects current policy stance: 3M T-bill is essentially fed funds plus a few bps of liquidity premium.
The two spreads diverge during regime transitions. In hiking cycles, T10Y2Y inverts before T10Y3M because 2Y prices in eventual rate cuts before the Fed actually starts cutting. The 2022 to 2024 episode showed this clearly: T10Y2Y inverted in July 2022, T10Y3M inverted three months later in October 2022. In easing cycles, T10Y3M typically becomes steeper than T10Y2Y because 3M falls faster than 2Y as cuts deliver. The current 10 bp gap reflects exactly this dynamic.
The 2022-2024 Inversion in Both Spreads
Both spreads were deeply inverted simultaneously through 2022 to 2024, but at different magnitudes. T10Y2Y peaked at minus 109 bps in March 2023. T10Y3M peaked at minus 188 bps in May 2023, almost 80 bps deeper than T10Y2Y at the most extreme inversion.
The gap between them widened to roughly 80 bps during peak inversion, with T10Y3M deeper than T10Y2Y. This was the "Fed reaching peak rates" signal: 2Y was already pricing in eventual cuts (averaging fed funds across the next 24 months including expected cuts), while 3M tracked the actual peak fed funds at 5.25-5.50 percent. The 80 bp gap reflected approximately 160 bps of expected cuts over 24 months priced into 2Y.
Conditional Forward Response (Tail Events)
How 10Y-2Y Yield Spread has historically behaved in the 5 sessions following a top-decile or bottom-decile daily move in 10Y-3M Yield Spread. Computed from 1,225 aligned daily observations ending .
Following these triggers, 10Y-2Y Yield Spread rises 1.92% on average over the next 5 sessions, versus an unconditional baseline of -3.87%. 123 qualifying events; 10Y-2Y Yield Spread closed positive in 41% of them.
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Frequently Asked Questions
What are the current readings for both spreads?+
The T10Y3M spread closed at 63 basis points and the T10Y2Y spread at 53 basis points on April 24, 2026 (10Y at 4.31 percent, 3M at 3.68 percent, 2Y at 3.78 percent). The 10 bp T10Y3M-minus-T10Y2Y gap is positive, indicating 3M sits below 2Y. This is the classic late-easing-cycle configuration: 3M tracks fed funds (now declining), while 2Y averages expected fed funds over the next 24 months. The 2Y at 3.78 percent prices in essentially flat fed funds over the next 24 months; the 10 bp positive gap reflects small remaining cut probability over 12-24 months.
Why do these two spreads move differently?+
T10Y2Y reflects expectations of Fed policy 0 to 24 months out (2Y equals average expected fed funds over 24 months). T10Y3M reflects current policy stance (3M is essentially fed funds plus a few bps of liquidity premium). They diverge during regime transitions: in hiking cycles, T10Y2Y inverts before T10Y3M because 2Y prices in eventual cuts before the Fed actually starts cutting. The 2022 cycle: T10Y2Y inverted July 2022, T10Y3M inverted October 2022 (three months later). In easing cycles, T10Y3M becomes steeper than T10Y2Y because 3M falls faster as cuts deliver.
Which inverts first during recessions?+
In all eight recessions of the last 50 years, T10Y2Y has inverted before T10Y3M during the preceding hiking cycle, with average lead time 3 to 6 months. T10Y2Y is forward-looking (prices in expected Fed cuts before they happen); T10Y3M is backward-looking (tracks current fed funds). T10Y2Y is the earlier-warning indicator but produces more false signals. T10Y3M only inverts when the Fed has actually pushed fed funds well above 10Y, which happens only during late hiking cycles. T10Y3M sustained inversion has 100 percent recession success rate over 8 episodes since 1968 (until the 2022-2024 episode).
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