The U.S. yield curve is flirting with another broad-based inversion again, reigniting Wall Street fears over the fate of the American economy.

A growing chorus of voices is being swayed by another notion: The signal might say more about the state of the world than the U.S. business cycle.

Treasuries now make up more than half of all global haven assets, double the share they accounted for during the financial crisis, according to Eurizon SLJ Capital. That complicates matters when long- and short-term yields flip: What used to be a reliable American recession indicator is instead an barometer of investors diving for cover worldwide.

It’s a narrative that makes a lot of sense as the threat from the coronavirus continues to grow, and it revives the frantic debate from last year about how much predictive power the curve actually has left.

“In a grab for safety and duration, everyone is going for U.S. Treasuries,” said Gregory Faranello, the head of U.S. rates at AmeriVet Securities. “The yield curve inversion is a signal now of global growth issues, and not really reflecting what is going on in the U.S.”

After a respite early last week the curve is once again flattening, and the gap between the rate on 10-year and three-month Treasuries narrowed for a third day on Monday. At the height of coronavirus angst and an equity sell-off at the end of last month it briefly inverted for the first time since October.

Bond yields typically rise alongside the duration of debt because they provide compensation for the effects of inflation. If rates on a 10-year note are lower than a three-month bill it suggests investors have a pessimistic view of growth and inflation a decade from now.

Stephen Jen, the chief executive officer at Eurizon SLJ, says global hunger for U.S. bonds helps explain American exceptionalism in growth, currency markets and stocks.

He predicts that by 2022, U.S. government debt will account for two-thirds of the world’s pool of haven bonds thanks to large issuance and quantitative easing by other central banks. His calculations are based on the outstanding amount of government debt in the U.S., Japan, and the three largest European economies, subtracting out the portion that is owned by central banks.

“The U.S. might, perversely, thrive because of troubles elsewhere,” Jen said in an interview. “When U.S. Treasury yields fall due to shocks outside of the U.S. that may or may not have an impact on the U.S. economy, it often provides added stimulus.”

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