Curve 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.
Curve steepening occurs when the gap between long-dated and short-dated Treasury yields increases. A bear steepener happens when long yields rise faster than short yields — often driven by inflation fears or fiscal concerns pushing up term premium. A bull steepener occurs when short yields fall faster as the market prices in Fed rate cuts ahead.
Steepening after an inversion is watched closely as a potential early-recession signal. Banks benefit from a steeper curve since they borrow short-term and lend long-term, widening their net interest margins.
Risk assets generally respond better to bull steepening (the Fed is easing) than bear steepening (long-end inflation/fiscal fears).
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.
IntermediateBid-to-Cover Ratio
Total bids received at a Treasury auction divided by the amount sold — a key gauge of demand strength for government debt.
AdvancedCarry (Rates)
In fixed income, the net income earned by holding a bond position after financing costs — positive carry means the bond yields more than its funding rate.
AdvancedCurve Flattening
When the yield spread between long- and short-term Treasuries narrows — short yields rising faster than long yields, or long yields falling faster.
AdvancedInverted 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