3-Month to 10-Year Slope

Think of it this way

It is the same hill measured with a different ruler: one measures from where you are standing, the other from where you think you will be in two years.

What is 3-Month to 10-Year Slope?

It is the distance between the yield on the 10-year Treasury note and the yield on the 3-month bill. It measures the same thing as 2s10s —whether lending long pays more or less than lending short— but using as reference the rate the Fed has set right now, because a three-month bill has hardly any room to price in anything else.

How to read 3-Month to 10-Year Slope

Same as 2s10s: above zero is normal, below zero it is inverted. It usually inverts earlier and more deeply than 2s10s, because the short end reacts to what the Fed has already done, while the 2-year reacts to what it is expected to do. Lag: none; a rate is priced in on the same day.

What 3-Month to 10-Year Slope means for the market

It is the version the New York Fed uses in its public recession probability model, so it is the one many institutional desks watch. In 2019 it gave a warning when 2s10s barely moved.

Where the money flows

It does not move money: it compares two prices from the same borrower, the Treasury, at two very different maturities. Example: if the 3-month bill yields 5.4% and the 10-year note 4.2%, anyone who funds short to lend long —which is what a bank does— is losing money on every new transaction, and the natural response is to extend less credit.

What to watch in 3-Month to 10-Year Slope

Always look at it alongside 2s10s, never on its own. If both invert, the signal is more consistent; if only this one inverts, the market does not yet expect cuts and the strain comes from the current rate, not from expectations.

The same slope measured against the rate the Fed has set today, not the one expected.