Q. So this cool-sounding term describes something we’re seeing as a result of this mornings jobs report, and some significant movement in bond prices?
A. Yep. It describes a change in the yield curve, the line that shows how shorter term rates relate to longer term rates. As you can guess, it means that the line is getter flatter. And the “bear” part of the phrase means: not in a good way.

Q. I think we have a chart that illustrates a bear flattener..
A. Yep. This has a “before and after” comparison that shows how these work overall– its more dramatic than today’s action to show the idea. You can see the [red] line, before the move, demonstrates a typical yield curve, with long term rates higher than short term ones. But the [blue] line shows what happens after the move: the long end stays about where it was, but short term rates go up. That’s the “flattener”.

Q. And of course that’s bearish because short term rate rise is negative for business and stocks.
A. Right. You can have “bull flatteners” too– where the flattening occurs because longer term rates come down, which is obviously good for business and stocks. So it’s all in how the flattening occurs.

Q. OK, but today is a “bear flattener”. What exactly is happening?
A. Seven year yields are up more than 10 year yields, and 10 year yields are up more than 30 year yields. So the curve is getting flatter because shorter term rates are rising more than long term rates. And you can see the “bearish” implications in the way stocks popped on the initial news, but have slowly backed off in reaction to the bond market.

Of course, all that’s happening not because of the jobs data itself, but because of how the market fears the Fed may react to the data, and either taper their current QE program or maybe even, heaven forfend, raise rates. And that sort of game theory guessing game is going to continue to drive changes in the yield curve and, hence, the stock market for a long time to come.