The difference between the 10-year and 2-year U.S. Treasury yields is a yield curve spread, commonly described as a term spread.
It is calculated by subtracting the shorter-term yield from the longer-term yield. For example, if the 10-year Treasury yields 4.0% and the 2-year Treasury yields 4.5%, the spread is negative 0.5 percentage points, or negative 50 basis points. That condition is called an inversion because short-term yields exceed long-term yields.
Investors and economists watch the spread because bond yields incorporate expectations about future interest rates, inflation, and economic growth. A narrowing or inverted curve can signal that markets expect weaker growth or eventual monetary easing. Yield-curve measures have therefore been used in recession-probability models, although they are warning indicators rather than guaranteed forecasts.
The 10-year-minus-2-year spread is widely discussed, but it is not the only convention. The New York Federal Reserve’s recession model emphasizes the 10-year Treasury yield minus the 3-month Treasury rate. “Credit spread,” “TED spread,” and “LIBOR-OIS spread” measure different kinds of financial risk and are not substitutes.