The 10Y-2Y Yield Spread is the difference between 10-year and 2-year US Treasury yields. When this spread turns negative (inverts), it has historically been the most reliable predictor of US recessions.
Normal vs. inverted curve
Normally, longer-term bonds yield more than shorter-term bonds (positive spread) because investors demand compensation for tying up money longer. An inversion (negative spread) means investors expect rates to fall — usually because they expect a recession that will force the Fed to cut.
Track record
Every US recession since 1970 was preceded by a yield curve inversion, typically 6-18 months before. However, not every inversion led to immediate recession, and timing varies. The "un-inversion" (curve returning to positive) is often the more immediate warning.
What it means for your finances
If the curve inverts, consider: building emergency fund, paying down variable-rate debt, being cautious with leveraged investments, and not assuming "this time is different." Recessions affect job security, real estate, and stocks — preparation matters more than precise timing.