Yield Curve Flattens, Steepener Trade Blows Up

After several days of a rapidly-steepening yield curve, with traders dumping the long end of the curve, things are reversing themselves a bit. Today it’s traders selling the short end, ostensibly on fears that a Fed rate hike could come before the end of the year, leading to a more flattish curve. At the same time, longer-dated 10 years are catching a bid.

What this means is that anyone who last week decided to get into that “steepener” trade, going long the short end, shorting the long end are getting demolished, particularly, as Zero Hedge points out, if they did it with leverage, which they probably did.

The chart below shows the sudden yield spike at the short end of the curve.

short end

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