The more pronounced inversion is a sign that people are more concerned about the fallout of the trade war between the US and China and worried by signs that economic growth may be slowing around the globe.

So why do investors care?

The yield curve has inverted before every US recession since 1955,although it sometimes happens months or years before the recession actually starts. Because of that link,substantial and long-lasting inversions of the yield curve are largely viewed as a strong predictor that a downturn is on the way.

Two researchers for the Federal Reserve Bank of San Francisco summed it up in a letter they published last year."Forecasting future economic developments is a tricky business,but the[yield curve] has a strikingly accurate record for forecasting recessions,"they wrote."Periods with an inverted yield curve are reliably followed by economic slowdowns and almost always by a recession."

The fact that people are willing to take such little money for their long-term bonds suggests that they aren't too worried about inflation,says Brian Rehling,co-head of global fixed income strategy for the Wells Fargo Investment Institute. If they aren't too worried about inflation,it also suggests that they expect the economy to grow more slowly in the future,he says. Inflation usually picks up when the economy is hot.

"Essentially,investors are saying,'We're worried about economic weakness,'"Rehling said.

The yield curve inversion also suggests that investors expect the Federal Reserve to keep cutting short-term interest rates in an effort to boost the economy,Rehling says.

Fed officials cut the benchmark interest rate by 0.25 percentage points last month,the first rate cut since December 2008. Investors are now expecting the Fed to cut rates by another 0.25 percentage points during their next meeting in September.

There are reasons to have hope the economy won't go into a recession. The labor market is strong,and most people who want a job are able to get one. Consumers are still opening up their wallets,which is lifting economic growth.

Even if the shift in the yield curve is followed by a recession,the slowdown may not happen right away. A look back at previous downturns shows that yields have typically inverted between six months and 18 months before the start of the recession.

The Washington Post