A major rally in the $27 trillion Treasury market is laying bare anxiety that the US economy is sliding into recession and the Federal Reserve will need to start aggressively cutting interest rates.

A prospect that might have seemed unthinkable just a couple short weeks ago is coming into view for bond traders: The potential for US Treasuries to post an annual gain for the first time since 2020.

Across Wall Street, there’s growing relief that the Federal Reserve — at long last — may be done raising interest rates. But that doesn’t mean turbulence in the bond market will soon become a thing of the past.

Listen to Wall Street’s top economists and you’ll hear the same message again and again: The risk of a recession is fading fast. And yet, in the bond market, the traditional warning that a downturn is near — an inversion of the yield curve — keeps getting louder.