How is it possible for the yield curve to be flat?

T he yield curve occasionally becomes flat (this is the case at present in the United States). How is this possible? Why would an investor buy a 10-year bond if it can buy a 2-year bond with the same yield? There are only two possibilities: I nvestors expect that long-term interest rates are going to fall, for example because they expect a slowdown in growth; The term premium has become zero, because uncertainty over future long-term interest rates has become zero, for example because the expected variability of nominal growth h as become zero. The first possibility seems consistent with past developments .