Scenario × Asset Analysis

What Happens to Baa-10Y Treasury Spread When the Sahm Rule Triggers?

What happens when the Sahm Rule recession indicator triggers? Every historical instance, market impacts, and what it means for your portfolio.

Baa-10Y Treasury Spread

1.72%

as of Apr 13, 2026

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Trigger: Sahm Rule Recession Indicator

0.20%

Condition: exceeds 0.5%

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How Baa-10Y Treasury Spread Responds

When the Sahm Rule Triggers, Baa-10Y Treasury Spread typically sees spreads widen as credit risk reprices. Moody's Baa minus 10Y Treasury, a wider measure of corporate credit risk. This scenario is particularly relevant for credit & financial stress because changes in Sahm Rule Recession Indicator directly influence the macro environment for Baa-10Y Treasury Spread. Investors should monitor both the trigger condition and Baa-10Y Treasury Spread's response to position accordingly.

Scenario Background

The Sahm Rule, developed by economist Claudia Sahm, triggers when the three-month moving average of the national unemployment rate rises by 0.50 percentage points or more relative to its low over the prior 12 months. It is designed to identify the start of a recession in real time, addressing the problem that official recession dating by the NBER often comes many months after a recession has already begun.

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Historical Context

The Sahm Rule triggered before or at the start of every US recession since 1970: 1970, 1974, 1980, 1981, 1990, 2001, 2008, and 2020. In the 2008 crisis, it triggered in early 2008,months before Lehman Brothers collapsed and before most observers acknowledged the recession. In 2020, it triggered in April as the pandemic shutdown obliterated the labor market. The indicator briefly crossed the 0.5% threshold in late 2024 amid a labor market normalization that did not lead to a recession, sparking d...