The U.S. 10-year Treasury note and the 3-month Treasury bill are on the verge of an inversion. The yield spread fell to 5 basis points Wednesday, the lowest level since the financial crisis.

Why it matters: "The yield curve has been a reliable predictor of recessions, and the best summary measure is the spread between the ten-year and three-month yields," the San Francisco Fed's Michael D. Bauer and Thomas M. Mertens wrote in August.

The spread between 3-month LIBOR and the 10-year note already has inverted.

What they're saying: BMO Capital Markets strategist Ian Lyngen notes that Wednesday was the first time the "invert that hurts," the 3-month/10-year spread, has been flatter than the 2-year/10-year spread since January.

The already tight spread compressed to 5 basis points after the Fed's conference. Fed funds futures prices show investors see a greater than 35% chance the Fed cuts rates this year and a 0% chance it raises them.

What to watch: The yield curve has been inverted for some time out to 5 years, with maturities from 1-month to 3 years holding higher yields than the 5-year note.

Editor's note: The headline was corrected due to a change made in the editing process to indicate the yield curve is on verge of inversion.