Question regarding Book2 Economics

[vt.knight]

On page 341 of Book 2 Economics, CFA Level 1

Leading indicators #9
Interest rate spread between 10-year treasury yields and overnight borrowing rate (fed funds rate)
Reason
Because long-term yields express market expectations about the direction of short-term interest rates, and rates ultimately follow the economic cycle up and down, a wider spread, by anticipating short rate increases, also anticipates an economic upswing. Conversely, a narrower spread by anticipating short rate decreases, also anticipates an economic downturn.
Is a book or me wrong?
From my understaning,
Spread = Long rate ‐ Short rate

Before recessions, the long rate dropped below the short rate. (short rate increases) which is opposite from what said in the book.
please advise

 

[Valerius]

to tv.knight
Question regarding Book2 Economics
On page 341 of Book 2 Economics, CFA Level 1
Both are right (you and book).
Long rate increases “by anticipating short rate increases” -> wider spread
Long rate decreases “by anticipating short rate decreases” -> narrower spread
If short rate is high you expect it will decrease -> decreasing long rate
If short rate is low you expect it will increase -> increasing long rate

 

[maratikus]

Think about pure expectation theory. If long term rates are above short term rates, short term rates are expected to go up in anticipation of economic upturn.
http://www.forextraders.com/forex-analysis/forex-fundamental-analysis/pu...