DEFINITION of 'Negative Butterfly'
A nonparallel yield curve shift in which long and shortterm yields decrease by a greater degree than intermediate rates. This yield curve shift effectively humps the curve, adding to the curvature of the yield curve.
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BREAKING DOWN 'Negative Butterfly'
For example, a negative butterfly shift can happen when short and long termrates decrease by 75 basis points (0.75%), while intermediate rates only decrease by 50 basis points (0.50%).
This is the reverse of a positive butterfly, in which short and longterm rates increase more than intermediate rates.
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