A situation in which the
yield curve for
bonds is flattening. That is, short-term
interest rates on
bonds rise more rapidly than long-term rates so that the two begin to converge, resulting in a flat (or flatter) yield curve when it is plotted on a graph. This is considered a
bearish indicator because it means that
investors believe that the higher interest rates on short-term bonds may produce a higher
return than
stocks will in the short-term. See also:
Inverted yield curve,
bullish flattener.