Strategies · Library · Fixed income
§5.12Carry
Rolling down the yield curve
Buy medium or long bonds where the curve is steepest and hold while they slide toward shorter maturity and higher prices, then sell and repeat.
Open in the builderAs a long-only proxy; see how ARCANE uses it.
- Asset class
- Fixed income
- Held for
- Months
- Data
- ARCANE has part of the data
- Symphony
- Builds as a long-only proxy
The rule
- Signal
- Curve steepness by maturity segment
- Entry and exit
- Buy the steepest segment bonds; sell as they near maturity; buy again.
- Sizing
- Concentrated in the chosen segment
How it fails
- Curve shifts erase the gain
- Duration risk
- Needs a curve view
Data it needs
- daily adjusted closes
- additional inputs ARCANE lacks
Treasury ETFs of different maturities proxy the segments.
How ARCANE uses it
A Call on a steeper curve can note which maturity gains most (paper only).
Builds as a long-only proxy. Hold the Treasury ETF with the highest recent return relative to its volatility.
Filed under the carry card
Own what pays more than it costs to finance (the return if prices stand still) and sell what pays less, across currencies, bonds, commodities and stock indexes.
A paper plan from this card holds 21 to 252 days, stops at 2× the expected move and uses at most 75% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §5.12, p. 75 of the SSRN version. Described in our words. Carry is ARCANE’s filing, not the book’s.