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Bear steepener

The curve steepens because long yields rise faster than short yields; a selloff led by the long end, usually about supply, inflation or term premium.

Here the front end is anchored, often because the fomc is on hold, while the 10-year and 30-year sell off. Causes include heavy quarterly-refunding issuance, a rising term-premium, foreign selling, or an inflation scare at the long end.

Bear steepening is hostile to equities, particularly long-duration growth names, because the discount rate on distant cash flows rises without any offsetting growth story.

Example: the 2-year is flat at 4.50% while the 30-year rises from 4.30% to 4.75%. Nothing changed about Fed policy, but 30-year mortgage rates and corporate borrowing costs jumped.

Related: bull-steepener, bear-flattener, term-premium, curve-steepener

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