Flattener and Steepner

Question 1

Bear Flattener

Answer 1

Rates are going up more on the short end than the long end

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.

a situation of rising bond prices which causes the long-end to fall faster than the short-end. Bear steepeners and flatteners are caused by falling bond prices across the curve.

Proceeds the fed raising interest rates

Question 2

Bear Steepener

Answer 2

Long term rates rise more than short term rates.

Rates on the long end rise more than on the short end.

Causes: Increase in long term inflation expectation with no action of central bank/monetary policy

Question 3

Bull flattener

Answer 3

Rates on the long end of the curve drops more on the long end than the short end.

Causes: QE pushes capital to higher riskier assets. Or a flight to quality.

Question 4

Bull steepener

Answer 4

Rates on the short of the curve end decreases more than on the long end.

A bull steepener is a shift in the yield curve caused by falling interest rates—rising bond prices—hence the term “bull.”

The short-end of the yield curve (which is typically driven by the fed funds rate) falls faster than the long-end, steepening the yield curve

This often happens when the Fed is expected to lower interest rates, a bullish sign for both the economy and stocks.