A nonparallel shift in the yield curve involving the height of the curve.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
A change in the yield curve for bonds in which yields on short-term bonds and long-term bonds change the same amount but the yield on medium-term bonds does not. For example, if yields on short- and long-term bonds move up 1.5% but the yield on medium-term bonds moves up only 0.5%, this is considered a butterfly shift. A butterfly shift may be positive, as in the example described, or negative, in which short- and long-term yields move down at a rate greater than medium-term yields. The term comes from the shape of the yield curve in these situations; it looks like a butterfly flapping its wings.
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