Bonds rallied as the Federal Reserve meets and is expected to make its fifth interest rate hike. The bond yield curve - the difference between where three-month rates are now versus where they are expected to be in 18 months’ time - is on the cusp of inverting. The spread between the two was at 0.2 percentage points on Tuesday, compared to 2.7 percentage points in April. An inverted yield curve is a key warning sign for many investors that a recession is coming. Many closely-watched spreads in the Treasury market have already flipped below zero.
