Little Concern About Inverted Curve

"Such was the case in 2000, when the inversion of the yield curve that began in January 2000 was followed by a decline in stock prices, earnings and a recession," says Crescenzi.

So even though that basis point may not have been as obvious as a burning bush, a sign is still a sign. Unless, of course, it's not a sign anymore.

"It used to be a leading indicator, but not at these yields," says David Rolley, co-portfolio manager of the (LSGBX Quote)Loomis Sayles Global Bond Fund.

"The real question is 'what slowed the economy in the past?' Was it the shape of the yield curve or the real cost of money?" asks Rolley. "The absolute cost of money is still not prohibitively high on an inflation-adjusted basis."

The Fed Pushes Up the Short End ...

"This time is different because the Fed has been proactive rather than reactive on the inflation front," says Bob MacIntosh, co-head of muni bond funds at Eaton Vance.

MacIntosh contends that the Fed has more than done its job nipping inflation in the bud by raising the overnight lending rate to 4% via 12 straight rate hikes. The fierce lifting at the front end of the yield curve has caused a "temporary inversion" that will be fixed once the Fed stops hiking rates, according to MacIntosh.

And with each passing day it's growing all the more clear -- just look at the year-end rally in stocks -- that the Fed is getting closer to calling it quits.

Fed funds futures currently forecast a 100% chance of a 25-basis-point hike at the Dec. 13 meeting and an 86% chance of a second 25-point hike by the Jan. 31 meeting. By the time the March 28 meeting rolls around, however, the probability of a third rate hike to 4.75% drops to 54%, which is why April futures have topped out at 4.64%.