Investors, spooked by the economic outlook, are demanding higher interest rates on short-term Treasury notes. Photo by John Angelillo/UPI | License Photo

Aug. 27 (UPI) -- The yield curve between 2-year and 10-year Treasury notes inverted to its deepest level in more than a decade Tuesday, further deepening experts' fears of a recession.

The 10-year Treasury note fell by 6 basis points to 1.48 percent and the 2-year note fell 2.3 basis points to 1.53 percent for a negative 4 basis points spread between the two -- the lowest level since 2007. The 30-year bond yield fell 7.7 basis points to 1.96 percent, which also inverted with the 3-month Treasury yield.


Yield curve inversions are an indicator of negative economic health and have historically preceded recessions.

Yield curves are typically positive, meaning investors usually expect higher interest rates on long-term bonds compared to shorter-term bonds because longer notes are more risky. When investors are worried about the economy, they begin demanding higher interest rates on short-term bonds.

U.S. stock indexes slumped Tuesday afternoon after Monday's rally to come back from last week's sharp drops in response to Chinese retaliatory tariffs. As of 2 p.m., the Dow Jones Industrial Average was down 0.24 percent to 25,836, while the Nasdaq Composite dropped 0.22 percent to 7,836 and the S&P 500 was down 0.15 percent to 2,874.