U.S. Treasury Yield Curve Inverts for First Time Since 2007

The gap between the three-month and 10-year yields vanished as a surge of buying pushed the latter to a 14-month low of 2.416 percent. Inversion is considered a reliable harbinger of recession in the U.S., within roughly the next 18 months.

Demand for government bonds gained momentum Wednesday, when U.S. central bank policy makers lowered both their growth projections and their interest-rate outlook. The majority of officials now envisage no hikes this year, down from a median call of two at their December meeting. Traders took that dovish shift as their cue to dig into positions for a Fed easing cycle, pricing in a cut by the end of 2020 and a one-in-two chance of a reduction as soon as this year.

"It looks like the global slowdown worries have been confirmed and the market is beginning to price in Fed easing, potential recession down the road," said Kathy Jones, chief fixed-income strategist at Charles Schwab & Co.