Bull Flattener

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 years ahead.

Contrast this with a bull steepener, where yields also fall, but short-term yields fall faster, often due to anticipated Fed cuts or a "flight to quality" that pulls the front end down more aggressively.

The “bear” trap: do not confuse it

A bear flattener is the opposite direction in rates. In a bear flattener, yields rise, usually led by the front end when the Fed is hiking. A bull flattener is driven by a rally in long-dated bonds, meaning long yields are falling.

Why it matters

Bond portfolios: This move tends to be a win for long-duration positions because bigger yield drops in the 10-year and beyond can create larger price gains.

Banking sector: A flatter curve can pressure net interest margins (NIM) by weakening the “borrow short, lend long” model.

Macro outlook: It often means markets are pricing in a growth slowdown and lower future inflation, which affects everything from asset allocation to loan pricing.

Visit GLOBAL ABAS for more insights.

Disclaimer: This post is for informational purposes only and does not constitute financial, legal, or investment advice. Please consult a qualified professional for guidance tailored to your situation.

For personalized support, contact GLOBAL ABAS Consulting, LLC with your specific questions or concerns.

Your feedback helps us improve the Finance Terms series - share your thoughts in the comments below.

Copyright © 2026 GLOBAL ABAS Consulting, LLC. All rights reserved.

Comments

Post a Comment

Popular posts from this blog

VIE Analysis: Understanding Variable Interest Entities in Investment Funds and Beyond

Image
VIE Analysis: Understanding Variable Interest Entities in Investment Funds and Beyond A Variable Interest Entity (VIE) is a legal structure where control is not based primarily on voting rights. Instead, control may arise through contractual arrangements, financial support, or other mechanisms. VIEs are central to modern finance, used in securitizations, structured funds, and cross-border investments, but they also carry accounting complexity. How VIEs Are Identified (ASC 810-10) Under ASC 810-10 (Consolidation) , a legal entity is considered a VIE if any of the following are true: It has insufficient equity investment at risk to finance activities without additional support. Its equity holders lack the power to direct significant activities . Its equity holders do not fully absorb the entity’s expected losses or returns . Key idea: In a VIE, traditional equity investors do not control the most important decisions. The Primary Beneficiary Rule A company must ...
Read more

Credit Default Swap (CDS)

Image
What Is a Credit Default Swap (CDS)? A credit default swap (CDS) is a type of financial contract that works like insurance. It protects a lender or investor in case a borrower does not repay a loan. In a CDS, one party pays regular fees to another party, called the seller. In return, the seller promises to pay if the borrower defaults on the loan. For example, suppose a bank lends money to a company. To reduce its risk, the bank buys a CDS from another firm. If the company fails to repay the loan, the CDS seller pays the bank the agreed amount. If the company pays back the loan on time, the seller keeps the fee and nothing else happens. CDSs became widely known during the 2008 financial crisis. Many banks and investors used them to bet on or protect against mortgage loans. But because CDS contracts are not regulated like insurance, some firms took on too much risk. When large numbers of borrowers defaulted, many CDS sellers could not cover the losses, le...
Read more

Artificial Intelligence (AI) in Accounting

Image
What Is Artificial Intelligence (AI) in Accounting? Artificial Intelligence (AI) in accounting means using smart computer systems to handle tasks that usually require human thinking. These systems can analyze large amounts of financial data, find patterns, and help with everyday accounting work like sorting invoices or checking for errors. For example, AI can scan and process hundreds of invoices in minutes. It can also spot unusual transactions that might point to fraud. Some AI tools can even give real-time insights on a company’s financial health, helping teams make faster and better decisions. It's important to know that AI does not replace accountants. Instead, it works alongside them. By taking care of repetitive tasks, AI allows accountants to focus on more complex work like strategy and financial planning. As businesses handle more data every day, AI is becoming a key tool in modern accounting. It helps teams work faster, reduces mi...
Read more