What does yield curve steepening mean?

A steepening yield curve is one where the difference between short-term and long-term rates increases. Whether the movement is at the short end or long end of the curve can provide insight into the market’s expectations for the economy and interest rate changes.

What does a flat yield curve mean?

A flattening yield curve is when short-term and long-terms bonds see no discernible change in rates. This makes long-term bonds less attractive to investors. Such a curve can be considered a psychological marker, one that could mean investors are losing faith in a long-term market’s growth potential.

What is a flattener trade?

One active trading strategy to take advantage of this scenario is to engage in what is referred to as a “flattening trade”. Under this strategy, the trader or portfolio manager would short sell the 10-year treasury and simultaneously buy long the 30-year bond.

Is a steepening yield curve bad?

When the difference is large (i.e “steep”), it indicates investors are significantly discounting future cash-flows. This is usually the case when the economy is rapidly growing and returns on investment and labor are strong.

What is bear steepening?

A bear steepener is the widening of the yield curve caused by long-term interest rates increasing at a faster rate than short-term rates.

What is bull Steepener?

A bull steepener is a change in the yield curve caused by short-term interest rates falling faster than long-term rates, resulting in a higher spread between the two rates.

What is a bear flattener?

Bear flattener refers to the convergence of interest rates along the yield curve as short term rates rise faster than long term rates and is seen as a harbinger of an economic contraction.

What does bull flattening mean?

A bull flattener is a yield-rate environment in which long-term rates are decreasing more quickly than short-term rates. In the short term, a bull flattener is a bullish sign that is usually followed by higher stock prices and economic prosperity.