Unexpectedly Intriguing!
November 29, 2006

Sometimes, we have absolutely no idea where one of our projects is going to lead. Our latest tool certainly fits in that category, as we started off by looking at the historic data for the yield curve in U.S. Treasuries, but kept coming back to the same question: "What bond yield spread do you need to reach a ___% probability of recession for a Federal Funds Rate of ___?"

We've kind of touched on this before, when we developed our tool for working out the spread needed to reach the 50% probability level of recession, but we had never gone beyond that, mainly because it's not something we've asked a lot before. Or even thought about asking a lot.

Then, suddenly, we kept having to go back to our recession odds reckoning tool to reverse engineer the spreads the hard way, one at a time, tweaking the input data until we got our desired result.

Well, that was nuts. And time consuming. So, instead, we took some of the data we generated and fit a curve to it so that now, all we need to answer our question is the Federal Funds Rate and the probability of recession in which we're interested in finding the associated spread in U.S. Treasuries. That work is now the tool you see below:

Federal Funds Rate and Recession Probability Data
Input Data Values
Federal Funds Rate (%)
Recession Probability Level (%)

U.S. Treasury Yield Spread Needed to Achieve Given Recession Probability Level
Calculated Results Values
Treasury Yield Spread (%)

What else can we say - our pain is your gain!

Labels: ,

About Political Calculations

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

ironman at politicalcalculations.com

Thanks in advance!

Recent Posts

Stock Charts and News

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

This page is powered by Blogger. Isn't yours?

CSS Validation

Valid CSS!

RSS Site Feed

AddThis Feed Button


The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.

Other Cool Resources

Blog Roll

Market Links

Useful Election Data
Charities We Support
Shopping Guides
Recommended Reading
Recently Shopped

Seeking Alpha Certified

Legal Disclaimer

Materials on this website are published by Political Calculations to provide visitors with free information and insights regarding the incentives created by the laws and policies described. However, this website is not designed for the purpose of providing legal, medical or financial advice to individuals. Visitors should not rely upon information on this website as a substitute for personal legal, medical or financial advice. While we make every effort to provide accurate website information, laws can change and inaccuracies happen despite our best efforts. If you have an individual problem, you should seek advice from a licensed professional in your state, i.e., by a competent authority with specialized knowledge who can apply it to the particular circumstances of your case.