Flat Yield Curve

A yield curve is flat when the differential between short-term and long-term bond yields is minimal. In a flat yield-curve environment, investors are not compensated for taking on long-term risk over and above the risk of owning short-term debt instruments. The shape of yield curves is a function of macroeconomic and monetary policy factors as well as technical market factors. Yield curves can flatten both as a result of rising short-end yields or falling long-end yields.