The yield on the benchmark 10-year Treasury note broke below the 2-year rate early Wednesday, an odd bond market phenomenon that has been a reliable, albeit early, indicator for economic recessions.
The yield on U.S. 30-year bond also turned heads on Wall Street during Wednesday's session as it fell to an all-time low, dropping past its prior record notched in summer 2016. The two historic moves coming in tandem show that investors are increasingly worried, and indeed preparing for, a slowdown in both the U.S. and global economies.
Earlier Wednesday, the yield on the benchmark 10-year Treasury note was at 1.623%, below the 2-year yield at 1.634%. In practice, that means that investors are better compensated for loaning the U.S. over two years than they are for loaning for 10 years. The yields steepened later in the session, pushing the 10-year rate back above that of the 2-year note at 1.58%.
The yield on the 30-year Treasury bond traded at 2.02%, well below its former record low of 2.0889% hit in 2016 following Britain's Brexit vote. Yields fall as bond prices rise.
The last inversion of this part of the yield curve was the one that began in December 2005, two years before the financial crisis and subsequent recession. Economists often give the spread between the 10-year and the 2-year special attention because inversions of that part of the curve have preceded every recession over the past 50 years.
"I have to yield to the historical evidence and note that the phrase 'this time is different' usually doesn't work," said Arthur Bass, managing director of fixed income financing, futures, and rates at Wedbush Securities.
"It's a very unusual time period: We haven't had tariff issues like we're dealing with currently in about 80 years," he continued. "It's about dealing with negative rates in most of the European countries and Japan. Again, I have respect for the inverted yield curve as a signal that recession is a...