hard · Debt Capital Markets
In a DV01-neutral 'butterfly' trade, an investor is long the 2-year and 30-year bonds (the 'wings') and short the 10-year bond (the 'belly').
This trade profits if which of the following occurs?
- The yield curve becomes more curved (the wings rally relative to the belly).
- The 2s10s curve flattens while the 10s30s curve steepens.
- Parallel yield curve shift of +50 bps.
- The yield curve becomes less curved (the belly rallies relative to the wings).
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