Strategies · Library · Fixed income
§5.2Carry
Bullets
Hold bonds of one maturity only, chosen from the view on rates: longer if rates are expected to fall, shorter if they are expected to rise. Buying over time spreads the entry rate.
Open in the builderAs a long-only proxy; see how ARCANE uses it.
- Asset class
- Fixed income
- Held for
- Years
- Data
- ARCANE has part of the data
- Symphony
- Builds as a long-only proxy
The rule
- Signal
- Outlook on interest rates, mapped to one maturity point
- Entry and exit
- Buy the chosen maturity and roll as it ages; add over time.
- Sizing
- All capital in one maturity
How it fails
- Rate moves hit price
- Concentration in one point
- Reinvestment risk
Data it needs
- daily adjusted closes
- additional inputs ARCANE lacks
Treasury ETF prices (SHY, IEI, IEF, TLH, TLT) are available; individual bonds are not.
How ARCANE uses it
A Call on rates direction can use one Treasury ETF as the stand-in (paper only).
Builds as a long-only proxy. Hold a single Treasury ETF of the chosen maturity.
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, §5.2, p. 70 of the SSRN version. Described in our words. Carry is ARCANE’s filing, not the book’s.