Rather than using one pair of treasuries, this indicator weighs them all in an overlapping fashion, to produce a composite yield curve that indicates the level of stress in the bond market.
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Updated title. This version is not FEDFUNDS weighted.
@kimozelghonemy, longer dated treasuries should offer a higher return than shorter dated treasuries. This is a healthy bond market, and the spread between durations is how banks, pension funds, and insurance companies make their money. When longer dated treasuries offer a lower yield, the market is in a state of dysfunction. If you look back at early 2020, you'll notice that the indicator inverted weeks before the FED began cutting rates drastically to prop up the market. The subsequent rate cuts caused the indicator to normalize again. So, the yield curve inverts due to negative market events. The FED responds to the yield curve inversion by cutting rates. The yield curve relaxes when the FEDFUNDS rate is low enough to allow short duration treasury yields to drop below their longer dated counterparts.
I would recommend checking out my other version that weights the value against the FEDFUNDS rate: tradingview.com/script/Bj19HlSL-US-Treasury-All-Yield-Curve-FEDFUNDS-Weighted/