NY Fed Model: 1-in-175 Chance of 2011 Double-Dip
The New York Federal Reserve updated its "Probability of U.S. Recession Predicted by Treasury Spread" this week with treasury yield data through December 2010, and the Fed's recession probability forecast through December 2011. The NY Fed's Treasury model uses the spread between the yields on 10-year Treasury notes (3.29% in December) and 3-month Treasury bills (0.14%) to calculate the probability of a U.S. recession up to twelve months ahead (see details here).
The Fed's model (data here) shows that the recession probability peaked during the October 2007 to April 2008 period at around 37-42% (see chart above), and has been declining since then in almost every month. For 2010, the recession probability is only 0.28% and for December of next year the recession probability is slightly higher, but still less than 1% (0.57%). According to the NY Fed Treasury Spread model, the odds of a double-dip recession through December of next year are about 1 in 175.