If recent data is any indication, the U.S. is on track to reap a sterling quarter of growth, but that hasn’t stopped the yield curve from flattening toward an inversion, a precursor to a recession.

A jump in retail sales, surging exports and strong consumer spending all point to the economy growing at an annual rate of 4% to 5% in the second quarter, bouncing back from its early weakness at the start of the year. Bond investors appear skeptical that this bump in growth can persist as longer-dated yields continue to fall this week.

That has helped to flatten the yield curve, usually measured by the gap between long-dated and short-dated yields. The spread between the five-year note yield TMUBMUSD05Y, 0.273% and the 30-year bond yield TMUBMUSD30Y, 1.406% has narrowed to 25 basis points, or 0.25 percentage points, the tightest levels since 2007. An inversion of the curve, when short-dated yields edge above long-dated ones, has preceded every recession since World War II.

When the economy gains momentum, the curve tends to steepen as investors demand higher yields on longer-dated bonds as compensation against a flare-up in growth and inflation, which can be bearish for bonds. Those forces, however, have been offset by the Fed’s tightening as a series of rate hikes will flatten the curve by driving up shorter-dated yields, which are more sensitive to monetary policy, and pushing down long-dated yields as higher borrowing costs weigh on growth expectations.

The curve-flattening picked up steam since the Fed raised rates by a quarter percentage point this week, and upped the projected fed funds rate to 2.4% by the end of the year, suggesting two further rate hikes this year are in the cards. After the 10-year Treasury note TMUBMUSD10Y, 0.665% briefly touched 3% on Wednesday, it has since retreated to 2.939%, while the two-year note yield has edged higher to 2.570% from 2.541%.

The flattening curve also pointed to a deep pessimism among bond investors who see the economy fading away its short-term boost from fiscal stimulus and tax cuts. The central bank’s survey of economic projections shows growth slowing from 2.8% this year to 2.0% in 2020.

“If the Fed continues to raise rates that makes the future more questionable after the effects of the tax plan wanes. That’s a formula for continuing flattening,” said Marvin Loh, senior fixed-income strategist at BNY Mellon.

See: Are the Trump tax cuts causing Americans to splurge?

Though Fed Chairman Jerome Powell emphasized his confidence in the newfound strength of the economy in Wednesday’s press conference, underlining an environment in which the central bank can safely raise rates without destabilizing the economy, investors ultimately see the recent burst in growth as fleeting.

“While some may be tempted to pop the champagne,” the second-quarter is likely to represent peak growth, said Gregory Daco, head of U.S. economics for Oxford economics, in a note. He also cited slower global growth and intensifying trade tensions painting a more dour picture for the economy.

It doesn’t help that strong data but a flattening yield curve is a hallmark of an economy entering a late-cycle boom, analysts said. Other recent signs that investors are enjoying the last hurrah of an economy in its ninth year of expansion include higher energy prices, elevated corporate leverage and a tight labor market.

And the curve’s approach towards an inversion has naturally led market participants to see the bond market indicator flagging the growing prospect of a recession. Scott Minerd, chief investment officer at Guggenheim Investment Management, recently suggested the yield curve was in line with its own forecasting models for a recession in 2020, according to reports.

Minerd ultimately sees the Federal Reserve’s rate hikes choking off credit, leading to mass defaults from debt-laden corporations.

Read: Markets are on ‘collision course for disaster,’ says Guggenheim’s Minerd