Yield Curve Strategy in Rising Interest Rates

A fixed income portfolio manager is evaluating various yield curve strategies to enhance returns in a rising interest rate environment. The manager considers three potential strategies: a steepening, a flattening, and a neutral strategy. Recently, the Federal Reserve has indicated its intention to increase interest rates.

The manager needs to decide which strategy to pursue based on the expected shape of the yield curve resulting from the anticipated rate increases. Analyzing the economic conditions and the relationships between short-term and long-term rates is essential in making this decision.