| In the chart above, note that all points that fall in the area below the horizontal axis represents the 'inverted yield curve' condition that gets Wall Street analysts' collective panties in a bunch! We also find in the chart that the 50% probability threshold may even occur when the spread between the 3-Month and 10-Year Treasuries is flat (equal to zero) or even positive for Federal Funds Rates equal to or greater than 6.200%!
Because this is Political Calculations after all, we've built the following simple tool to determine the bond yield spread needed for the Federal Funds Rate you enter for the U.S. economy to have a 50% chance of recession in the next 12 months:
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