This app allows users to see which market regime exists as of the selected date. The regime is a result of movements in yields as measured by the Level and Slope components of the yield curve.

The components of the yield curve — Level and Slope — were formalized by Litterman and Scheinkman (1991) and account for the vast majority of historical yield curve variation. This app uses the following proxy definitions:

  • Level = 10 Yr (the general level of rates across the curve)
  • Slope = 10 Yr − 3 Mo (the spread between long and short rates)

The possible regimes are

  • Bull Steep - Level and Slope decreasing and increasing, respectively, characterized by short-term rates falling faster than long-term rates
  • Bull Flat - Level and Slope both decreasing, characterized by long-term rates falling faster than short-term rates
  • Bear Steep - Level and Slope both increasing, characterized by long-term rates rising faster than short-term rates
  • Bear Flat - Level and Slope increasing and decreasing, respectively, characterized by short-term rates rising faster than long-term rates.
  • Consolidation - Changes in Level and Slope are both below 5 bps over the lookback window, indicating no clear directional signal.

Changes in Level and Slope are computed relative to a lookback window. The system default is 251 market days.

Instructions

  • choose the desired Start and End dates using the two date selectors
  • choose the desired Long Tenor and Short Tenor from the dropdown menus
  • click GO to render the chart for the chosen parameters
  • click the sparkle button to open ChatYCP and ask questions about the data (login required)

Notes

  • Start and End are pre-populated with the earliest and latest dates available, respectively
  • Long Tenor, Short Tenor, and Lookback are pre-populated with system defaults (10 Yr, 3 Mo, and 251 days, respectively). Logged-in users can change these via Account Defaults
  • try asking ChatYCP: "What is the current yield curve regime?" or "How many regime transitions occurred in 2024?"

Use Cases

  • selecting the best asset classes for a given regime
  • risk management and hedging
  • economic analysis and forecasting

Further Reading