Term Spreads and Policy Uncertainty in Perspective The combination of yield curve inversion and high uncertainty is the exception, rather than the rule. Figure 1: Economic Policy Uncertainty index (Baker Bloom and Davis) (gray, left scale), and 10yr-3mo spread (blue, right scale), and 10yr-2yr spread (red, right scale), in %. January 2019 observation are daily observations through 1/23. NBER defined recession dates shaded gray. Orange denotes Trump administration. Source: policyuncertainty.com, Fed, NBER. Something to remember when considering this post: the effects might not be additive.