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Illustration: Lazaro Gamio/Axios

The difference between the yield on 10-year Treasury notes went further below the yield on 3-month bills Wednesday. The difference is the most since 2007 and suggests that the inverted yield curve may not be going away.

Why it matters: Since the 1970s, an inverted yield curve has preceded every U.S. recession. However, economists, fund managers and other experts have been waving off the inversion's importance so far this year in a way that's eerily familiar.

What they said before: When the yield curve inverted in January 2006, in much the way it has this year, former Fed Chair Ben Bernanke said not to worry. "In previous episodes when an inverted yield curve was followed by recession, the level of interest rates was quite high, consistent with considerable financial restraint," he said in a speech in March 2006. "This time, both short- and long-term interest rates — in nominal and real terms — are relatively low by historical standards."

  • Bernanke's predecessor, Alan Greenspan, labeled it a false indicator, noting that long-term yields were being held down by heavy investor demand, just as they are now.
  • The Wall Street Journal's Greg Ip wrote in January 2006 that it was foreign buying of U.S. bonds and exceptionally low yields on U.S. Treasuries (then about 4%, compared to today's yields which are closer to 2%) that was causing the inversion.

Yes, but: It wasn't just 2006 when experts were certain things were different this time.

  • "We said the same thing in 2000," Bank of America trading strategist Gerald Lucas quipped to the FT in January 2006, while noting that "the inversion was the result of scarcity value at the long end of the curve to do with Treasury buybacks."

Be smart: The experts also insisted that economic data was strong and the usual recession warnings signs — other than the inverting yield curve — simply weren't there.

  • "I think it sometimes portends a recession, sometimes not," said Marshall E. Blume, a finance and management professor at the University of Pennsylvania's Wharton School. This time, it probably does not, he added in 2006.
  • "All the forecasts are quite favorable. There aren’t any real excesses in the economy at the current time."

Go deeper ... Economic whiplash: Stocks are rising, but analysts still fear a recession

Go deeper

Updated 2 hours ago - World

Over 70 dead in worst bombardments between Israel and Hamas for years

Palestinian Muslims exchange wishes for Eid al-Fitr, marking the end of the fasting month of Ramadan, near a razed building in the northern Gaza Strip town of Beit Lahia, on May 13. Israeli forces said they had killed a senior Hamas commander in May 12 airstrikes. Gaza's health ministry said children died in the strikes. Photo: Majdi Fathi/NurPhoto via Getty Images

At least 67 Palestinians and seven Israelis have been killed in fighting between Israel's military and Hamas since Monday, per Reuters.

The big picture: The worst aerial exchanges of fire between Israel and Hamas since 2014 continued into early Thursday. It comes days after escalating violence in Jerusalem that injured hundreds of Palestinians and several Israeli police officers during protests over the planned evictions of Palestinian families from their homes.

Biden admin grants Colonial waiver to ease fuel shortages

Fuel tanks at Colonial Pipeline Baltimore Delivery in Baltimore, Maryland on Monday. Photo: Jim Watson/AFP via Getty Images

The Biden administration approved a temporary waiver of shipping requirements late Wednesday to help Colonial Pipeline transport fuel, as service resumes across the U.S. following last week's ransomware attack that that took it offline.

Why it matters: The century-old Jones Act requires ships to be built in the U.S. and crewed by American workers, but the waiver means foreign companies can transport gasoline and diesel to areas where there are fuel shortages.

Updated 6 hours ago - Politics & Policy

Don McGahn agrees to closed-door interview with House panel on Russia report

Former White House counsel Don McGahn during a discussion at the NYU Global Academic Center in Washington, D.C., in 2019. Photo by Alex Wong/Getty Images

Former White House counsel Don McGahn agreed Wednesday to speak with the House Judiciary Committee about former President Trump's alleged attempts to obstruct the Russia investigation — with certain conditions, per a court filing.

Why it matters: The agreement ends a two-year standoff after McGahn, a key player in former special counsel Robert Mueller's investigation, repeatedly refused to agree to a subpoena for testimony — resulting in the matter being taken to court.

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