End of Chapter Question - Yield Strategies Q21

CFA Level III Fixed Income
#1

An active investor enters a duration-neutral yield curve flattening trade that combines
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

Answer given is C. But shouldn’t the answer be A. A change in IR should have no impact as the portfolio has zero duration. But a steepening would move the slope opposite to the expected change.

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#2

You’re correct; their answer’s wrong.

With all of the candidates who have questioned it, you’d have thought that they’d have fixed this by now.

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