One closely watched portion of the U.S. yield curve has inverted, reigniting worries that the end of the U.S. economic expansion may be looming.
Yields on 10-year Treasurys were at about 2.432% as of 11:34 a.m. ET on March 22, dipping below yields on 3-month Treasury bills, which were at about 2.455%, according to The Wall Street Journal.
An inversion of the two has historically signaled a recession was on the way, and market participants have kept a close watch on the bond market signal. Another closely watched spread, which compares yields between 10-year and 2-year Treasurys, remains in positive territory but was hovering around 10 basis points.
Yields on 10-year Treasurys have declined following the Fed's March 20 decision to keep its benchmark interest rate unchanged. Fed officials also nudged down their expectations of GDP growth this year to 2.1% and signaled they would not raise rates again until 2020.
Some Fed officials, such as St. Louis Fed President James Bullard, have worried about the yield curve's flattening over the past year. But its predictive power has come into question, with other officials saying that central banks' quantitative easing purchases have distorted what has historically been a recession indicator.
Ryan Sweet, of Moody's Analytics, said the central bank asset purchases have "artificially depressed" U.S. yields and said an inversion would only be worrying if it was persistent.
"It has to be a sustained inversion," Sweet said. "If it inverts for a few minutes or a few hours or a couple of days, it's not indicative of a recession coming."
Still, he added, the yield curve move may end up having psychological effects by denting business and consumer sentiment. The S&P 500 was down about 1.45% in midday trading.
Fed Chairman Jerome Powell said during his March 20 news conference that U.S. economic fundamentals remain "very strong" but that officials were keeping an eye on slower growth in China and Europe.
Another sign of weaker global growth came March 22, as the latest IHS Markit data showed a sharper contraction in German manufacturing activity. Yields on 10-year German Bunds fell around the same time and dipped into negative territory.