Economic security

The market's favorite recession indicator just flashed its biggest warning since 2007

A continued rally in long-term US Treasurys on Tuesday caused the market's favorite recession indicator to flash its biggest warning since before the financial crisis.

The spread between two- and 10-year Treasury yields fell as low as negative 4.2 basis points, its most inverted level since May 2007. Investors continue to look for safe-haven assets like US government bonds as trade tensions between the US and China rage on, pushing yields lower.

The relationship is the most closely watched section of the so-called yield curve, and it has inverted before each of the last seven recessions.

This newfound bout of risk aversion came as Chinese officials downplayed trade progress made between the US and China. President Trump said earlier this week that he'd restarted talks — a notion dispelled by the Chinese government itself.