What is Negative Butterfly?
A non-parallel generate bend change in which long- and short-term results in reduce by a greater degree than advanced prices.
This generate bend move effectively humps the bend, increasing the curve of the generate bend.
For example, a negative butterfly move can happen when short- and lengthy term-rates reduce by 75 foundation factors (0.75%), while advanced prices only reduce by 50 foundation factors (0.50%).
This is the reverse of a positive butterfly, in which short- and long-term prices increase more than advanced prices. Because the generate bend is generally an indication of future interest levels, which are an indication of an economy’s development or shrinkage, generate shapes and changes in generate shapes can express significant amounts of information. Changes in the shape of the generate bend can also have an impact on profile profits by making some ties more or less valuable compared to other ties. Thus, if a trader can properly prediction the direction and type of change in the generate bend, he or she can buy and sell those investments most affected by those changes.