Abstract: By using the dynamic factor model to build the SW index, this paper calculates the correlation coefficient between the long-term interest rates as well as the short-term interest rates and the SW index, and then constructs STR model by taking the 15-year and 2-year bond yield difference as conversion variable and the term spreads as transition variable to examine the term spreads early warning of China’s macroeconomic fluctuations．Then empirical analysis demonstrates that term spreads call be a reliable early warning indicator of China’s macroeconomic fluctuation．Then an out-of—sample forecast is made,and it states that China’s economy is recovering slowly,but still in the economic contraction phase. Thus, the Chinese government should continue its proactive fiscal policy and prudent monetary policy to maintain its steady economy growth．

Keywords: Term spreads; SW index; STR Model; Forecasting