Curve Flattening
When the yield spread between long- and short-term Treasuries narrows — short yields rising faster than long yields, or long yields falling faster.
Curve flattening occurs when the spread between long and short Treasury yields compresses. A bear flattener — the most common — happens when short yields rise faster than long yields as the Fed hikes rates; the market anticipates that aggressive tightening will slow growth and bring rates back down eventually.
A bull flattener occurs when long yields fall faster than short yields, often on flight-to-safety buying of long Treasuries during risk-off events.
Sustained flattening is a warning sign for risk assets. It signals tightening financial conditions at the short end while long-end growth expectations moderate — a headwind for economically sensitive sectors and leveraged credit.
Related Terms
2s10s Spread
The yield difference between the 10-year and 2-year U.S. Treasury notes — the most widely cited gauge of yield curve shape and recession risk.
IntermediateCurve Steepening
When the yield spread between long- and short-term Treasuries widens — usually as long yields rise faster than short yields, or short yields fall faster.
AdvancedFederal Funds Rate
The overnight interest rate at which U.S. banks lend reserve balances to each other — the primary policy rate the Fed targets to steer the economy.
IntermediateInverted Yield Curve
When short-term Treasury yields exceed long-term yields — historically the most reliable leading indicator of U.S. recession.
IntermediateYield Curve
A graph of Treasury yields across all maturities — from 3 months to 30 years — that maps the term structure of interest rates at a given moment.
Intermediate