Negative Butterfly


DEFINITION of 'Negative Butterfly'

A non-parallel yield curve shift in which long- and short-term 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.

BREAKING DOWN 'Negative Butterfly'

For example, a negative butterfly shift can happen when short- and long term-rates 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 long-term rates increase more than intermediate rates.

  1. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote ...
  2. Flat Yield Curve

    A yield curve in which there is little difference between short-term ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, ...
  4. Positive Butterfly

    A non-parallel yield curve shift in which short- and long-term ...
  5. Normal Yield Curve

    A yield curve in which short-term debt instruments have a lower ...
  6. U.S. Savings Bonds

    A U.S. government savings bond that offers a fixed rate of interest ...
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