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Bull flattener

The curve flattens because long yields fall faster than short yields; a rally led by the long end, often a growth scare or flight to quality.

The front end is pinned by current policy, so when investors pile into duration for safety or because they think long-run growth is slowing, the 10-year and 30-year rally hardest and the curve flattens.

Bull flattening typically shows up on weak ism-manufacturing-pmi data, geopolitical shocks, or a sharp drop in inflation-expectations. It is deflationary in flavour and often accompanies falling commodity prices.

Example: the 2-year falls 5 bp to 4.55% while the 10-year falls 22 bp to 4.05%. 2s10s moves from -33 bp to -50 bp, a 17 bp bull flattening.

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

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