This Reliable Indicator Signals An Imminent Recession

The 3-month Treasury bill yield-to-junk bond spread ratio — which has signaled every recession since 1997 without false positives — recently fell below then rebounded off its 100-period weekly moving average. That technical break-and-rebound is a classic recession warning and implies elevated downside risk for risk assets and wider credit spreads in the coming months; monitor credit markets and reduce duration/credit exposure as appropriate.

Analysis

The 3-month Treasury bill yield-to-junk bond spread ratio — which has signaled every recession since 1997 without false positives — recently fell below then rebounded off its 100-period weekly moving average. That technical break-and-rebound is a classic recession warning and implies elevated downside risk for risk assets and wider credit spreads in the coming months; monitor credit markets and reduce duration/credit exposure as appropriate.