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U.S. Markets Flash Warning Last Seen Before Great Recession

Benchmark yield curve “inverts” for first time since 2007. Fed says economy is still strong.

A bellwether U.S. bond indicator has turned negative for the first time since the beginning of the financial crisis in 2007. The closely watched gap between yield rates on the three-month and 10-year Treasury notes vanished in trading early Friday as buyers rushed into the longer-term bonds, pushing prices down. This event—known as inversion—has long been a reliable predictor of economic recessions in global markets. Federal Reserve Chairman Jerome Powell said Friday the U.S. economy is facing a “stern test” from the bond market turbulence. Analysts pointed to the Fed’s comments this week that it would hold steady on interest rates for all of 2019 as a source of investors’ worries. “Yield curves are responding to what they see, to what I believe is a global economic slowdown,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, told CNBC. “You don’t see this kind of move in curves, not just here but everywhere, unless you get one.”