The current yield spread between three-month T-bills and 10-year T-notes -- the key empirical gauge -- is 276 basis points, a level that historically has indicated that the chances of recession 12 months hence are very small.

In a study by Estrella and Mishkin, a yield spread of more than 121 basis points was associated with just a 5% chance of recession, which makes the current level comforting. For reference, note that the same study showed that a yield spread of -82 basis points (an inverted yield curve), produced 50% odds of a recession. The yield spread was as wide as -60 basis points in February 2007.