VIX vs 10Y-2Y Yield Curve
VIX (CBOE Volatility Index, FRED series VIXCLS) measures 30-day implied volatility on the S&P 500 from listed options; the 2s10s spread (FRED series T10Y2Y) is the 10-year minus 2-year nominal Treasury yield, the recession signal that has preceded every U.S. recession since 1976 with one open exception.
Also known as: VIX (fear index, volatility index, CBOE VIX) · 10Y-2Y Yield Spread (yield curve, yield spread, 10-2 spread, 2s10s)
Why This Comparison Matters
VIX (CBOE Volatility Index, FRED series VIXCLS) measures 30-day implied volatility on the S&P 500 from listed options; the 2s10s spread (FRED series T10Y2Y) is the 10-year minus 2-year nominal Treasury yield, the recession signal that has preceded every U.S. recession since 1976 with one open exception. The pair separates near-term equity stress from term-structure-implied growth pessimism. The July 2022 to August 2024 inversion lasted roughly 25 months and reached -108bp at its trough in March 2023, the deepest 2s10s reading since 1981, while VIX averaged 18.9 over the same window. That divergence (deeply inverted curve, calm equity vol) is what made 2023 unprecedented in the joint history of the two series.
What each leg measures and why desks watch them together
VIXCLS is computed from a strip of S&P 500 SPX options expiring 23 to 37 days out and is published by CBOE every 15 seconds during trading hours. T10Y2Y is the constant-maturity 10-year Treasury yield minus the constant-maturity 2-year, both sourced from the U.S. Treasury H.15 release and posted daily on FRED. The two are observed in different markets: VIX comes from equity-option dealers, T10Y2Y comes from primary-dealer Treasury auctions and the secondary cash market. They share one underlying input, the path of the federal funds rate, but encode it differently. VIX prices the variance of equity returns over the next 30 days; the 2s10s prices the difference between the average expected funds rate over the next two years and the next ten years.
The Federal Reserve Bank of New York maintains a recession-probability model built on the 10y-3m spread, but private research desks at Goldman Sachs and BofA Global Research have published since 2019 on the joint VIX/2s10s system because the curve alone misfired in 2022 to 2024. Estrella and Mishkin (1998, FRBNY) is the original term-spread reference; the joint indicator framework appears in Cieslak and Vissing-Jorgensen (2021) on Fed put dynamics.
How the joint signal behaved in 2022 to 2024
T10Y2Y first inverted on April 1, 2022, briefly reverted, then re-inverted on July 5, 2022 and stayed below zero until August 27, 2024, a 25-month run. The trough hit -108bp on March 8, 2023 during the Silicon Valley Bank failure. VIX during that 25-month window averaged 18.9 and only closed above 30 on five trading days, all of them during the SVB and First Republic episode in March 2023. Real GDP grew 2.9% in 2023 and printed 3.0% annualized in Q2 and Q3 2024 per BEA
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 VIX. Computed from 1,239 aligned daily observations ending .
Following these triggers, 10Y-2Y Yield Spread rises 10.20% on average over the next 5 sessions, versus an unconditional baseline of -3.92%. 123 qualifying events; 10Y-2Y Yield Spread closed positive in 46% of them.
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Frequently Asked Questions
Why didn't the 2022 to 2024 yield-curve inversion produce a recession?+
The 25-month inversion from July 2022 to August 2024 was driven primarily by term-premium compression rather than aggressive policy-tightening expectations. Cleveland Fed and FRBSF research (Haubrich and Bauer-Mertens) document that post-2008 QE structurally lowered term premium by 80 to 120bp, which shifted the inversion threshold downward. The joint VIX/2s10s reading captured this: VIX averaged 18.9 during the 25-month window, well below the 22-plus average that preceded prior recession-confirming inversions. Real GDP grew 2.9% in 2023 and 3.0% annualized in Q2 and Q3 2024 per BEA.
How deep did the 2s10s spread go in 2023?+
T10Y2Y bottomed at -108bp on March 8, 2023, coinciding with the Silicon Valley Bank failure window. That is the deepest 2s10s inversion since the 1981 Volcker tightening cycle, when the spread reached -240bp. The March 2023 banking stress added roughly 30bp of additional flight-to-quality flattening on top of the underlying Fed-tightening-driven inversion. The curve then re-steepened toward zero through 2023 and finally un-inverted on August 27, 2024.
What does it mean when VIX is low while 2s10s is inverted?+
It means the bond market is pricing recession risk that the equity-options market is not. Historically this configuration is rare and usually resolves through either a VIX spike that confirms the curve signal (1980, 2007 to 2008) or through a term-premium re-rating that un-inverts the curve without recession (2022 to 2024). The 2022 to 2024 episode is the only post-1976 example of the second resolution path. Current April 2026 readings have moved past this configuration: the curve is positive and VIX is low.
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Data sourced from FRED, CoinGecko, CBOE, and other providers. This page is for informational purposes only and does not constitute financial advice. Past performance does not guarantee future results.