In the current issue of Economic Trends published by the Federal Reserve Bank of Cleveland, Joseph G. Haubrich and Kent Cherny examine recent changes in the yield curve.
...[The] slope of the yield curve, has achieved some notoriety as a simple forecaster of economic growth. The rule of thumb is that an inverted yield curve (short rates above long rates) indicates a recession in about a year. Yield curve inversions have preceded each of the last seven recessions (as defined by the NBER), the current recession being a case in point.
The probability of recession coming out of the yield curve is very low and may seem strange in the midst of recent financial news, but one aspect of those concerns has been a flight to quality, which lowers Treasury yields.
Here is a more lively presentation on the yield curve.
stockonline2, February 09, 2009
A dynamic review of the action of the yield curve alongside the S&P Index. Captured from stockcharts.com
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