Fixed Income: Parallel and Non-parallel Yield curve shifts

When the yield curve undergoes a parallel shift, the yield on all maturities change by the same amount. When there is a non-parallel shift, the yields change by different amounts which can be classified under two categories: Twists and Butterfly shifts.

Twists: The slope of the yield curve either becomes flatter or steeper. A flattening curve means the spread between short term and long term rates have narrowed. A steeper yield curve means the spread between the short term and long term rates have widened. Got it?

Butterfly Shifts: These are changes in the curvature of the yield curve. A positive butterfly is a curve that becomes less curved. Essentially the shortest and longest term rates increase more than the intermediate rates. The negative butterfly is the opposite, there is more curvature and the short and long term rates don't change as much as the intermediate rates. A positive butterfly means a convex curve. Negative means concave.