Finance Terms

Bull Flattener A bull flattener is a move in the yield curve where interest rates fall across maturities, but long-term rates fall more than short-term rates . The curve gets flatter because the gap between short and long yields shrinks. It often signals expectations of easier policy over time, plus concern about slower growth and lower inflation ahead. Quick example (2-year vs 10-year) Imagine the 2-year Treasury yield drops by 25 basis points , while the 10-year Treasury yield drops by 75 basis points . Since the 10-year fell much more, the spread between 10-year and 2-year yields becomes smaller. That narrowing spread is what “flattens” the curve, even though both yields moved down. The catalyst (why it happens) A bull flattener usually shows up when investors are more worried about long-term stagnation or disinflation than near-term funding stress. Long-dated bonds rally hard because markets expect lower inflation and weaker growth over the yea...

Bear Flattener A bear flattener is a move in the yield curve where interest rates rise across maturities , but short-term rates rise more than long-term rates . The result is a flatter curve, even though yields are higher overall. Simple example: suppose the 2-year Treasury yield jumps from 4.50% to 5.25% (up 75 basis points), while the 10-year yield rises from 4.20% to 4.45% (up 25 basis points). Short rates “bear” the bigger move upward, so the curve flattens. What usually causes it? Fed tightening: markets price in more rate hikes, which hits short-term yields most directly. Sticky near-term inflation: investors demand higher yields in the front end because inflation looks stubborn in the next 6 to 24 months. Growth concerns later: long-term yields may rise less if investors think tighter policy will slow the economy. Why people confuse it: A bull flattener is also a flattening, but it happens when yields fall , often because the market expects rate cuts o...

Bull Steepener A bull steepener is a move in the yield curve where the curve gets steeper because short-term yields fall more than long-term yields . It is called “bull” because overall interest rates are falling , which is usually positive for bond prices. What it looks like: Imagine the market starts to expect the central bank to cut rates soon. The 2-year Treasury yield, which is heavily influenced by near-term policy, drops from 4.50% to 3.80% . The 10-year yield drops too, but less, say from 4.20% to 4.05% . The gap between 10-year and 2-year yields widens from -0.30% to +0.25% . That widening is the “steepening.” Why it happens: A bull steepener often reflects two ideas at the same time. First, the market expects easier policy soon , which pulls short-term yields down. Second, investors may still expect better growth or higher inflation later , so long-term yields do not fall as much, and can even rise. Do not confuse it with a bear steepener :...

Bear Steepener A bear steepener is a move in the yield curve where long-term interest rates rise more than short-term rates . The curve becomes steeper because the gap between long and short yields widens. It is called “bear” because rising yields usually mean falling bond prices . What it looks like (simple example) Imagine the 2-year Treasury yield goes from 4.0% to 4.2% (up 0.2%), while the 10-year Treasury yield goes from 4.2% to 4.8% (up 0.6%). Long-term yields moved up more, so the yield curve steepened. Since bond prices move inversely to yields, 10-year bond prices would typically fall more than 2-year bond prices . Why does a bear steepener happen? Higher long-term inflation expectations: Investors demand higher yields to protect purchasing power. Heavier Treasury issuance: More long-term bonds for sale can push long yields higher. Stronger growth expectations: Markets may price in higher future rates and higher long-run borrowing costs. Common conf...

Employment Cost Index (ECI) The Employment Cost Index (ECI) is a key measure of how much employers are paying for labor. It tracks changes in the cost of wages, salaries, and employee benefits over time. The ECI is published quarterly by the U.S. Bureau of Labor Statistics (BLS). Unlike some other wage measures, the ECI is designed to show the true cost of labor by holding job types and industries constant. This makes it a reliable way to see whether compensation is rising or falling across the economy. For example, if the ECI shows a significant increase over several quarters, it could mean that workers are getting paid more or receiving better benefits. This might sound like good news, but it can also be a sign of inflation pressure. When businesses have to pay more to attract and keep employees, they may raise prices to cover those costs. This ripple effect can push overall inflation higher. Because of this, the ECI is closely watched by the Federal Reserve and other poli...

Job Openings and Labor Turnover Survey (JOLTS) The Job Openings and Labor Turnover Survey, or JOLTS, is a monthly report released by the U.S. Bureau of Labor Statistics. It tracks how many jobs are available (job openings), how many people are getting hired, and how many are leaving their jobs (whether by quitting, being laid off, or retiring). JOLTS gives us a behind-the-scenes look at the U.S. job market. For example, if job openings are rising but hiring is not keeping up, it might mean companies are struggling to find qualified workers. This could signal a mismatch between the skills employers want and the skills workers have. Why does this matter? Investors and policymakers watch JOLTS closely to understand the health of the economy. A strong job market usually means people have money to spend, which supports business growth. But if there are too many unfilled jobs, it can lead to wage increases as companies compete for talent. In turn, rising wages can lead to inflation, ...