Explanation

When short-term yields move in the opposite direction of long-term yields, this primarily represents a change in the steepness of the yield curve.

Yield curve factors:

• Level: Parallel shifts where all maturities move in the same direction
• Steepness: Changes in the slope between short-term and long-term rates (when they move in opposite directions)
• Curvature: Changes in the middle portion of the curve relative to the ends

Example:

• If short-term rates increase while long-term rates decrease, the yield curve becomes flatter (less steep)
• If short-term rates decrease while long-term rates increase, the yield curve becomes steeper

This opposite movement between short and long ends directly affects the slope or steepness of the curve.