Rates & Yield Curve
Why can a yield curve flatten during tightening?
Central-bank policy has its strongest direct influence at the shortest maturities, while longer yields combine the expected policy path with inflation expectations, growth expectations and term premium. That is why different parts of the curve can move in opposite directions around a decision.
How to read it
Read curve shape as a decomposition problem: current policy, expected future policy and compensation for holding duration can all move separately.
Watch the policy-rate path, front-end OIS pricing, the 2s10s or equivalent curve shape, inflation expectations and the central bank’s own communication. Together they show whether markets are repricing the current decision, the next cycle, or the credibility of the framework.
Central-bank effects are regime-dependent. The same policy action can produce different market outcomes when inflation, growth, positioning or prior expectations differ.