NY Federal Reserve’s Recession Indicator

The monthly arithmetic mean of the daily spread between the ten year treasury note and three month treasury bill is taken, then plugged into a real linear function (that is, a function of the form y=mx+b). This function then gives a number that falls somewhere under the curve of a standard normal distribution, and the probability that an observation falls to the left of that number is the recession indicator. Current month’s indicator is supposed to give the probability of a recession one year in advance.