12:08 (1.5X)
21. An active investor enters a duration-neutral yield curve flattening trade that com- bines 2-year and 10-year Treasury positions. Under which of the following yield curve scenarios would you expect the investor to realize the greatest portfolio loss?
A. Bear steepening
B. Bull flattening
C. Yields unchanged
C is correct. A duration-neutral flattening trade involves a short 2-year bond position and a long 10-year bond position, which have a “matched” duration or portfolio duration of zero. This portfolio will realize a loss if the slope of the yield curve—that is, the difference between short-term and long-term yields— increases. Yield curve inversion is an extreme version of flattening in which the spread between long-term and short-term yields-to-maturity falls below zero. The bear steepening in A involves a rise in the 10-year yield-to-maturity more than in the 5-year yield-to-maturity, causing a portfolio loss. The bull flatten- ing in B combines a constant 2-year yield-to-maturity with lower 10-year rates, resulting in a gain on the 10-year bond position and an unchanged 2-year bond position.
不因该选A吗？