What strategy involves taking a long position in 2-year Treasuries while simultaneously taking a short position in 10-year Treasuries?

The strategy of taking a long position in 2-year Treasuries while simultaneously taking a short position in 10-year Treasuries is indicative of a belief that the yield curve will steepen. When investors expect that the difference in yields between short-term and long-term bonds will increase, a steepening yield curve strategy becomes favorable.

By going long on the 2-year Treasuries, the investor expects that the yield on these shorter-term securities will fall, or at least not rise as much as the yield on longer-term securities, which is reflected in the short position on 10-year Treasuries. If the yield curve steepens, the difference between the short-term and long-term interest rates will increase, benefiting the investor's overall strategy. This position allows them to capitalize on the expected movement of interest rates and profit from the widening yield spread between short- and long-term bonds.

In contrast, the other options represent different market strategies or conditions. For example, yield curve flattening involves the opposite scenario where the yield gap narrows, which would not support the long/short position described. Interest rate swaps pertain to exchanging fixed interest rate payments for floating, and duration matching is related to aligning the interest rate sensitivity of assets and liabilities