  [abbreviated] We report resolved near-infrared spectroscopic monitoring of
the nearby L dwarf/T dwarf binary WISE J104915.57-531906.1AB (Luhman 16AB), as
part of a broader campaign to characterize the spectral energy distribution and
temporal variability of this system. A continuous 45-minute sequence of
low-resolution IRTF/SpeX data spanning 0.8-2.4 micron were obtained, concurrent
with combined-light optical photometry with ESO/TRAPPIST. Our spectral
observations confirm the flux reversal of this binary, and we detect a
wavelength-dependent decline in the relative spectral fluxes of the two
components coincident with a decline in the combined-light optical brightness
of the system over the course of the observation. These data are successfully
modeled as a combination of brightness and color variability in the T0.5 Luhman
16B, consistent cloud variations; and no significant variability in L7.5 Luhman
16A. We estimate a peak-to-peak amplitude of 13.5% at 1.25 micron over the full
lightcurve. Using a two-spot brightness temperature model, we infer an average
cloud covering fraction of ~30-55% for Luhman 16B, varying by 15-30% over a
rotation period. A Rhines scale interpretation for the size of the variable
features explains an apparent correlation between period and amplitude for
three highly variable T dwarfs, and predicts relatively fast winds (1-3 km/s)
for Luhman 16B consistent with lightcurve evolution on an advective time scale
(1-3 rotation periods). Our observations support the model of a patchy
disruption of the mineral cloud layer as a universal feature of the L dwarf/T
dwarf transition.
