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Negative Carry

外汇网2021-06-19 13:36:50 40
A situation in which the cost of financing a securities or financial futures position exceeds the yield earned.

Taobiz explains Negative Carry

A negative carry would occur if an investor borrowed $1000 at 12.5% and used the $1000 to purchase a bond yielding 9.5%. The bond's coupons would not cover the interest owing, so the investor would end up paying 3% to make the investment.

An investor might, however, achieve a positive after-tax yield if the bond is tax-exempt and interest on the loan is tax-deductible.

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