Sun 17 Feb 2008
It’s worth taking note that the recession calculator is forecasting with a 94% probability* a recession will occur in the next 12 months. The calculation is based on the current 10 year, 3 month, and overnight rates…
It’s not surprising, considering that the yield spread (30yr/3mo) looks like this:
Incidentally, the last time we saw such a dramatic rise was in 2001…
Oh yeah, and the folks betting at Intrade puts odds north of 60%…
* You arrive at the 94% rate by putting in the real 3 month bond rate of 3.07% instead of the 3 month discount rate of 3.03%. A minor difference that doesn’t make much difference (91% chance vs. 94% probability of recession? Either way, it’s coming.), but Yahoo only gives me the discount rate easily.