Recently, U.S. bond investors spooked financial markets by demanding a higher premium on shorter-dated government debt when compared to longer-term bonds.

Specifically, the yield on the 10-year Treasury note fell below the rising yield on the 3-month Treasury bill for the first time since 2006. Dubbed the yield curve inversion, the phenomenon often presages recession.

Against a backdrop of a softening global economy, the inversion has put Wall Street on edge. However, a growing number of observers have a message for the markets: Relax.

A premium on shorter-term rates “is an important phenomenon and one ought not ignore it, but from our perspective more important than the shape of the curve is the level of rates,” said Krishna Memani, CIO of OppenheimerFunds, which has over $229 billion in assets under management.

Despite the Federal Reserve’s rate hiking campaign that came to an end in December, its relatively loose policy has kept the overall level of rates low for the better part of the past decade and continues to be “more supportive than it has been for a long time,” he added.

On Monday, former Federal Reserve chair Janet Yellen stated that the rise in short-term rates was not a sign of a recession, but could be suggesting a coming interest rate cut by the Fed.

“Certainly the market is flashing warning signs, and investors are buying intermediate-term debt hand over fist,” said Andrew Szczurowski, a portfolio manager and vice president at Eaton Vance, who manages a government debt fund worth $4 billion.

Given that the Treasury curve has been flattening for several years because of the Fed’s quantitative easing, “this time is different for a number of reasons,” Szczurowski added. “The market’s getting a little ahead of itself.”

JPMorgan analyst Marko Kolanovic also acknowledges that this time is different, noting that the 10-year note’s yield has been “kept artificially lower by zero or negative yields outside of the U.S....significant QE activity, and carry trades.”

‘Scaring people into wrong facts’

Meanwhile, opinions differ sharply on the exact segment of the yield curve that some analysts are using to gauge the potential for a recession. On Tuesday, Goldman Sachs analysts argued investors shouldn’t use the 3-month bill/10-year yield as a recession gauge, but instead should look at the 2-year/10-year differential.

That argument was reinforced by Brian Belski, Bank of Montreal’s chief investment strategist, who said the recent gap between short and long-term yields “has caused a tremendous amount of conjecture and diatribe” from market watchers that are “scaring people into wrong facts and analysis.”