NY Federal Reserve’s Recession Indicator 2013-08-01 to 2013-08-31

Release Date: 
Thu, 09/05/2013
Coverage Start: 
Thu, 08/01/2013
Coverage End: 
Sat, 08/31/2013

Current: 1.25%
Previous: 1.61%

The New York Federal Reserve’s recession indicator – which is used to determine the probability of a recession one year from now – fell 0.37 percentage points from July to August. The indicator is based on the yield curve – or the spread between interest rates on 10-year Treasury bonds and 3-month Treasury bills – which increased 0.16 percentage points. This increase is a direct result of a 0.16 point increase in the yield of 10-year Treasuries with T-bills unchanged from the previous month. Rates on T-bills are largely controlled by the Fed, and have little room to fall as they have been held near zero for several years now. Treasuries, on the other hand, have been affected by investors’ fears that the Fed would reduce its bond-buying program – known as quantitative easing – within the next few months. Thus yields on Treasuries have been gradually rising within the last few months to accommodate investors’ risk aversion.