Maximum AUROC Term Spreads as of 11/25

In 2019, Fed economist David Miller undertook a comprehensive assessment of term spread predictive power for recessions (There is No Single Best Predictor of Recessions). For the 1984-2018 period, he found the following:

Figure 2: AUROC Sample 1984 – 2018 from Miller (2019).

For a discussion of AUROC (Area Under Receiver Operating Characteristics curve), see this post by Jim H.

What do these spreads look like as of Friday?

Figure 1: 1yr-Fed funds spread (chartreuse), 5yr-Fed funds (red), 10yr-Fed funds (bold teal), 10yr-1yr (sky blue), and 3yr-2yr (purple), all in %. Red dashed line at expanded Russian invasion of Ukraine. Source: Treasury via FRED, and author’s calculations.

The 1yr-Fed funds spread (1-2 month horizon) has not gone negative, nor has the 5yr-Fed funds spread (4-9 months) although it’s come close. The 10yr-Fed funds spread (10-19 months) did end negative on November 10th, which would suggest that somewhere between September 2023 and August 2024 a recession would occur. The 10yr-1yr has also registered negative on July 12th, so between 20 and 23 months ahead (February to May 2024).

Here by the way are the usual spreads I show:


Figure 2: 10yr-Fed funds (teal), 10yr-3mo (blue), and 10yr-2yr (dark red), all in %. Red dashed line at expanded Russian invasion of Ukraine. Source: Treasury via FRED, and author’s calculations.

Note that the AUROCs were calculated for simple term spreads, and not models incorporating other variables like foreign term speads, financial conditions indices or stock prices (as discussed in this post).



9 thoughts on “Maximum AUROC Term Spreads as of 11/25

    1. Macroduck

      ltr insists on planting the same stupid data about Covid deaths in comments here, day after day, along with off-topic stories about Chinese rainbows and lollipops. And unicorns – can’t forget the unicorns. China’s death rate from Covid is two orders of magnitude lower than the U.S. rate. Right. Sure.

      It is obvious enough why Chinese and U.S. data show such different death rates from Covid. Worldometer, whence ltr derives data, relies on official sources. That means China’s government provides data on China, worldometer repeats it and ltr repeats that. Using a common data “source” gives the impression that data are comparable, but that’s not true.

      Y’all remember when information about Covid was first becoming available? One thing we learned about was “co-morbidity”, medical conditions which increase the harm caused by some other medical condition. Covid is mostly not a solitary killer. Obesity, geriatric conditions, heart disease, black-lung, asbestosis…y’all know the list. China simply attributes death to other causes than Covid to an in order to claim that so-called zero Covid policies work. I submit that China cooking the data is the most parsimonious explanation for the steaming pile of nonsense ltr relentlessly dumps here.

      Or we could say “The heck with persimmons! Never liked ’em, anyway.” We could assume that Chinese folk are so genetically different from everyone else that they just naturally survive Covid is greater than everyone elses. But that would be racist. Heaven knows, we wouldn’t want to be racist. So, to avoid racism, we have to conclude that China lies, day after day, about Covid deaths. Which means we must also conclude that ltr lies day after day.

      But we already knew that.

    1. Barkley Rosser


      What? Only three repetitions here of that 3.6 number? Clearly that is not enough given all those people waving white pieces of paper or ones with Friedmann equations on them when we all know they should be waving copies of Xi Jinping’s Thought like people used to do with Mao’s Little Red Book, given how Xi is truly their Big Brother.

      I think what you need to do, ltr, is further lower that number. I mean it went down once already from 4.0 to 3.6 without any explanation. So, move it down further to 3.2 and at least double the number of times you post it here. That should get at least the attention of those Chinese students at Yale and Stanford who are protesting against Chinese Covid policies.

      And, hey, maybe you should also remind us again of how there have been no Covid deaths in China since May 2021, even though they are having a record number of cases. This is all so very convincing!

  1. ltr

    November 28, 2022

    China aids Africa’s poverty fight through agricultural cooperation
    China has been implementing technical cooperation programs in Burundi since August 2009, sending a total of 45 experts to the African country in five batches to help develop agriculture.

    BUJUMBURA — On a sultry afternoon, Charles Ngendakumana, a farmer in Burundi’s northwestern Bubanza Province, was busy adding a handful of grass to the cattle trough in the backyard of his newly-built rural home, a spacious single-storey bungalow with freshly painted lime walls.

    Around him, about a dozen hens were running around. Pointing to them, he said these chickens had been given to his family by Chinese agricultural experts. “They also provided good rice seeds and fertilizer and taught me planting techniques so that I have enough food to feed my children”, the 43-year-old father of six added.

    Four years ago, Ngendakumana began growing hybrid rice introduced from China under the guidance of Chinese agricultural experts. Since then, his farmland has also increased from half a hectare to five hectares in Ninga, a village in the Commune of Gihanga.

    “Next, I want to buy more land, more cows, as well as several new water pumps when the dry season comes,” said Ngendakumana in a recent interview with Xinhua, asserting that this was “unthinkable” in the days before the arrival of the Chinese expert teams when he could not even get enough food.

    Known as the “heart of Africa”, the East African country Burundi has a tropical climate with abundant rainfall. Its natural conditions are favorable to rice production, but the low yield of local rice production makes Burundians long suffer from food shortages.

    To address such a challenge, China has been implementing technical cooperation programs in Burundi since August 2009, sending a total of 45 experts to the African country in five batches to help develop agriculture….

    1. ltr

      About rice growing and eating, which has characterized more than half the world’s population, Chinese agricultural specialists went to Madagascar several years ago to introduce hybrid rice to island farmers and adapt the rice to the local climate. The result has been the richest rice harvests in Africa and gratitude enough in Madagascar that this year the national currency was redesigned with an engraving of a Chinese hybrid rice field as background. Such is being happy and grateful for the happiness.

      1. Macroduck

        Wait…you can tell it’s hybrid rice from an engraving on a coin? Such is happy, Happy, HAPPINESS!!!

        Are you writing this dreck now because your masters are in a panic? Is mindless happy talk about China a barometer of how tightly knickers are twisted in Beijing?

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