Question

If the interest rate on three-month Treasury securities is 5 percent and the interest rate on ten-year Treasury securities is 5 percent, then the odds of a recession are

		less than 15 percent.
		between 25 percent and 40 percent.
		about 80 percent.
		100 percent.

Answer 1

Normally people expect less interest rate first short term bills, then compared to long term bills.
Because there is a high-interest rate risk in the long term bills.

But during a recession, people expect more interest rate first short term bills, then compared to long term bills.
Because they perceive more risk in the short term (i.e due to recession) and expect high returns.

In such a situation,
The Investor perceives long term to be much safer than short term.

When the yield curve inverts it doesn't guarantee recession, it's can be a warning signal/symptom to a maybe upcoming threat/disease.

When both of them are equal, there is less than a 15% chance of recession.
Answer: less than 15 per cent.