DEFINITION of 'Positive Butterfly'
A nonparallel yield curve shift in which short and longterm rates shift upward by a greater magnitude than medium term rates. This yield curve shift effectively humps the curve, adding to its curvature.
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BREAKING DOWN 'Positive Butterfly'
A nonparallel shift in the yield curve happens when not all of the maturities on the curve move by the same rate. For example, if shortterm and longterm rates move upward by 100 basis points (1%) while mediumterm rates remain the same, the convexity of the yield curve will increase. This yield curve shift is called a positive butterfly shift because it causes the curve to hump.
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