According to TechFlow, according to Jinshi Data, bond traders are betting that the U.S. economy is on the verge of deterioration and the Federal Reserve will need to start easing monetary policy aggressively to avoid a recession.

Previous concerns about high inflation have largely disappeared, quickly giving way to new worries that the economy will stall unless the central bank starts cutting interest rates from more than 20-year highs.

That is driving one of the biggest bond market gains since fears of a banking crisis erupted in March 2023. The rally has been so strong that the yield on the policy-sensitive two-year Treasury note fell 50 basis points last week to less than 3.9%.

Not since the global financial crisis and the dot-com bust have yields been so far below the Federal Reserve’s benchmark rate, currently around 5.3%.