Can it forecast recessions based on bulk bond rate data? For a while now, people have been subtracting the rate of 2-year treasury bonds from the rate of 10 year treasury bonds, and if the resulting number approaches or reaches zero, then that means a recession is <2 years away since institutional investors require the same risk premium for 2 year bonds as 10 year bonds (indifference is presumed to be due to volatility during a recession). But there’s also 5-year treasury bonds, and 5-year-and-three-days treasury bonds, because a 5 year bond is just any bond that’s exactly 5 years away from maturity. Seems to me like that’s a lot of data, and it could vastly outperform subtracting the 10-year bond rate from the 2-year bond rate and comparing the resulting coefficient to zero.
Can it forecast recessions based on bulk bond rate data? For a while now, people have been subtracting the rate of 2-year treasury bonds from the rate of 10 year treasury bonds, and if the resulting number approaches or reaches zero, then that means a recession is <2 years away since institutional investors require the same risk premium for 2 year bonds as 10 year bonds (indifference is presumed to be due to volatility during a recession). But there’s also 5-year treasury bonds, and 5-year-and-three-days treasury bonds, because a 5 year bond is just any bond that’s exactly 5 years away from maturity. Seems to me like that’s a lot of data, and it could vastly outperform subtracting the 10-year bond rate from the 2-year bond rate and comparing the resulting coefficient to zero.
https://fred.stlouisfed.org/series/T10Y2Y
https://www.investopedia.com/terms/i/invertedyieldcurve.asp