The yield on two-year U.S. Treasury notes was higher than the yield on the 10-year for a while Wednesday, marking the first time since June 2007 this curve has inverted. Many market participants see this as a sign of a coming recession in the next year or two. Other parts of the curve — the 3-month to 10-year and the 2- to 5-year — inverted earlier this year and remain inverted.
“The significant decline in rates has led to meaningful inversion in key parts of the interest rate curve — historically these types of inversions have signaled that economic weakness and a recession is forthcoming over the next 18 months,” according to Brian Rehling, co-head of global fixed income strategy for Wells Fargo Investment Institute. “From a bond market perspective, risks in the market are to the downside.”
(Read more: Bond Buyer: Feed)