JTreasuries and related exchange-traded funds are gaining strength as investors look to the relative safety of government debt amid growing recession fears.

Tuesday, the Vanguard Extended Duration Treasury ETF (EDV) increased by 1.8%, the SPDR Portfolio Long-Term Treasury ETF (SPTL) increased by 1.3%, the PIMCO 25+ Year Zero Coupon US Treasury Index ETF (ZROZ) increased by 2.6% and iShares 20+ Year Treasury Bond ETF (TLT) gained 1.5%.

“This is recession trading,” Neil Dutta, chief economics officer at Renaissance Macro Research, told Bloomberg. “There is no other way to describe it.”

Some market watchers have pointed out that bond markets are also issuing recession warnings, with the Treasury yield reversing where yields on longer-dated Treasuries are trading below those on shorter-dated notes. For example, as of mid-Tuesday, the yield on the two-year Treasury was 2.792%, above the 2.789% rate on the 10-year note, CNBC reports.

“There’s something about investor sentiment that’s hard to ignore, given that the reversal is happening with 10-year yields below 3%,” Ian Lyngen, head of rates strategy, told CNBC. Americans at BMO. “I wouldn’t say that’s a direct indication that a recession is a near-term risk. Rather, it corresponds to heightened concern about the recession.

Although we are not currently in a recession, Dutta warned that markets are already pricing in the potential for an economic recession.

“We’re not in one right now, but the markets are a discounting mechanism and I think the markets are seeing the economy potentially going into one or getting closer to one,” Dutta added. “We’ve come a long way in pricing during a recession in the markets, but I don’t think we’ve come to that.”

Dutta warned that the outcome will likely depend on the Federal Reserve or how aggressively the Fed acts to fight inflationary pressures and an overheated economy.

“I don’t think it’s inevitable, but I think a lot of it depends on what the Fed does,” Dutta said. “If the data suggests the Fed should deviate from its current policy approach and it doesn’t, then we have a problem. To me, that’s the problem.

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