The most deeply inverted part of the U.S. yield curve is one that hasn’t sent a false signal about the prospects of a U.S. recession in more than a half-century of research.

That’s the spread between 10-year and 3-month Treasury yields, which was around 155.8 basis points below zero as of Wednesday — reflecting a 3-month T-bill rate TMUBMUSD03M, 4.811% that’s trading well above its 10-year counterpart TMUBMUSD10Y, 3.293%. The large difference between the two rates is pointing to the likelihood of a “deep recession,” according to Campbell Harvey, the Duke University professor who pioneered the use of the spread as an indicator of future economic growth.

Recession fears are back in focus after this week’s data provided fresh evidence that the Federal Reserve’s yearlong rate-hike cycle is finally having an impact on the labor market. While bond-market volatility has trended lower over the past three weeks, liquidity problems and concerns about a potential U.S. debt-ceiling crisis continue to plague Treasurys and exacerbate the market’s moves, according to Tom di Galoma, managing director and co-head of rates trading for financial services firm BTIG. The 10-year/3-month spread is further below zero than it was in the run-up to the 2007 -2008 financial crisis and in the late 1980s, when the Federal Reserve pushed interest rates back above 8% to 9%…

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