The longest-dated bonds are feeling the heat globally, moving the Treasury yield curve away from inversion, as the U.S. government considers borrowing for a century.

After the U.S. curve inverted last week, sparking debate over whether a recession could be 12-18 months away, it steepened Monday as yields on 10-year and 30-year bonds climbed faster than shorter maturities. That came after the U.S. government said Friday it would reach out to investors on the potential issuance of 50- or 100-year bonds.

While the immediate prospect of extending the maximum U.S. maturity beyond the current 30 years may be slim, it would permanently alter the shape of the yield curve if it goes ahead, said bond traders. The move at the end of the Treasury curve fed through into Europe, where traders also reacted to the prospect of Germany opening up its purse strings in a crisis.

“In this market, selloffs can be vicious,” said Antoine Bouvet, senior rates strategist at ING Groep NV. “There has been some supportive developments on the trade front, and yes the fiscal policy discussion is looking like it is finally happening in Germany, but it is fair to say that investors should reserve their judgment on both these issues.”

Thirty-year Treasury yields jumped eight basis points to 2.11% by 11:45 a.m. in London, adding to a six-basis-point increase on Friday. The rebound comes after they slipped below 2% for the first time last week and reached a record-low 1.91%. The two-year, 10-year curve widened to nine basis points, having dropped below zero on Wednesday.

‘Very Risky’
German 30-year yields also climbed eight basis points to -0.14%, fueled by heavier losses in European swap rates. Longer-dated yields across the globe have bounced after slumping to record lows last week, which left investors crying out for yield. The U.S. could provide that if it goes ahead with longer-dated issuance, while locking in lower borrowing costs for longer.

“If you were to get 3.5% to 4% in U.S. Treasuries, that would be very attractive at this point in time,” Tristan Hanson, a money manager at M & G Ltd., told Bloomberg TV. “The bond market looks very risky.”

The last five times the yield on 10-year Treasuries dropped below those on two-year securities, a contraction has followed. The Treasury yield curve has undergone a turbulent few weeks amid the prospect of an interest-rate cut from the Federal Reserve next month, increased tensions in the U.S.-China trade war and signs that the global economy is slowing.

Should the U.S. borrow as far out as 100 years, it would join countries such as Austria and Argentina who have already issued so-called century bonds. They have had contrasting success, with the former’s having returned investors 70% this year, while the latter’s tumbled 29% last week alone.

It’s not the first time the U.S. Treasury has weighed extending the maturity of its debt, doing so in 2017, but then it was met with a tepid response from analysts. Not all are convinced this time around either.

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