The 10-year yield has sunk so much that it dropped below the yield of the two-year Treasury Wednesday, a rare occurrence and one that has historically suggested a recession maybe a year or two away.
"The yield curves are all crying timber that a recession is nearly a reality and investors are tripping over themselves to get out of the way as economic recession hurts corporate earnings and stocks can drop as much as 20 percent", said Chris Rupkey, chief financial economist at MUFG Union Bank.
As Yahoo Finance's Brian Cheung pointed out: "The yield curve inversion has a strong track record of predicting a recession; each of the last seven recessions (dating back to 1969) were preceded by the 10-year falling below the 2-year".
In the aftermath of the latest Wall Street slide, Asian stocks also took a hit.
The benchmark ASX 200 index closed 2.9 per cent lower at 6,408 on Thursday, a stunning retreat from its record high reached on July 30.
Traders tend to shift money to the safety of USA government bonds when they're fearful of an economic slowdown.
The Dow Jones Industrial Average slipped 28 points, or 0.1%, to 25,450, and the Nasdaq composite fell 0.3%.
The S&P 500 fell 2.7%, as of 3:00 p.m.
The declines are led by bank stocks in the premarket, as the environment makes it hard for the group to make any profit lending money.
While some pundits have said today's inversion is a sign that it's time to sell stocks, it's still as hard as ever for everyday investors to time the market profitably.
"We expect USA yield curves beyond 2-year maturities to re-steepen", the report stated.
Prices for everything from stocks to gold to oil have been volatile this month as investors flail from one moment of uncertainty around Trump's trade war to another around what central banks will do with interest rates.
That's a sign that traders have sought the sanctuary of USA government bonds amid concerns of an economic slowdown.
Millions of USA workers lost their jobs in the recession a decade ago, as well as their homes, when they no longer had enough money to make monthly loan payments.
How fragile is the global economy?
Wholesale gasoline fell 4 cents to $1.64 per gallon. But there is something else about government bonds there that is a clearly sign of a weak economic outlook: the fact that yields are below zero. The S&P 500 is down more than 4% as investors fear a prolonged trade dispute could further weaken the global economy.
The yield on the 10-year Treasury dropped from 2.02% on July 31 to below 1.60%.
The growth worries come amid economic stress in Argentina and some other emerging markets, fears of Chinese military intervention in Hong Kong and trade tensions that show no sign of abating. They also likely look to lock their money into high-paying bonds when they expect central banks like the Federal Reserve will soon cut future rates to stave off an impending recession.
In turn, this has caused a key metric - the US Treasury yield curve -to invert, sending shockwaves across the globe. -Chinese tariff war over trade and technology.
Macy's plunged 13% after slashing its full-year profit forecast.
Brent crude was down 0.8 percent at $59.03 a barrel, after falling 3 percent in the last session, while U.S. crude fell 0.5 percent to $54.96 a barrel, having dropped 3.3 percent in the previous session. France's CAC 40 was flat at 5,253.02.
The dollar fell to 105.88 Japanese yen from 106.68 yen on Tuesday. The euro edged up to $1.1142 from $1.1138.