Term Spread
a.k.a. Yield spread, 2s10s
The gap between long-term and short-term interest rates, such as 10-year minus 2-year Treasury yields.
In plain English
The gap between long-term and short-term interest rates, such as 10-year minus 2-year Treasury yields.
The term spread measures the slope of the yield curve. Take a long-term yield, like the 10-year Treasury, and subtract a short-term one, like the 2-year or 3-month. Normally it is positive: lenders want extra pay for tying money up longer.
When it turns negative, an inverted yield curve, it has historically been one of the more reliable warnings that a recession may follow, although the timing can vary a lot.
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