Parallel and Non-parallel Shifts in Yield Curve

Parallel Shift

Rates across the maturity spectrum change by a constant amount and the slope of the yield curve remains consistent.

Non-Parallel Shifts

• Twist: The slope of the yield curve becomes flatter (the spread between short and long term yields narrows) or steeper (the spread between short and long term yields widens).

• Butterfly: Change to the curvature of the yield curve.

  Positive butterfly: The yield curve goes loses some of its "hump" and becomes straighter.

  Negative butterfly: The yield curve takes on more of a hump and ceases to look similar to a straight line.