Positive Butterfly

Yoga position? Berlin-based EDM collective? Nope. It's a weirdly shaped yield curve (a phrase that, on its own, could make a good name for a Berlin-based EDM collective...we'd get up and dance for Weirdly Shaped Yield Curve).

A yield curve tracks the rates paid for various bonds based on maturities. Normally, longer-term bonds pay higher rates than shorter-term ones. In other words, you're going to get paid a higher rate to own a 30-year bond than a 2-year bond.

A positive butterfly is an unusual situation where both short-term rates and long-term rates increase faster than medium-term rates. So the two ends of the yield curve move up, but the middle lags behind. (The ends make up the wings of the butterfly; the middle represents the body).

A negative butterfly represents the opposite situation: short-term and long-term rates drop in relation to medium-term rates. Both the positive and negative butterflies are considered non-parallel yield curve shifts. The name comes from the fact that the changes don't manifest evenly across the yield curve.