Strategies · Library · Fixed income
§5.3Carry
Barbells
Split money between short and long maturity bonds. The long end earns more yield, the short end can be reinvested if rates rise, and the mix has more convexity than a middle bond with the same average sensitivity.
Open in the builderAs the book sets it out, long only.
- Asset class
- Fixed income
- Held for
- Years
- Data
- ARCANE has part of the data
- Symphony
- Builds in the symphony builder
The rule
- Signal
- Two maturities and their weights
- Entry and exit
- Hold both ends and rebalance to the weights.
- Sizing
- Fixed split between short and long
How it fails
- Lower yield than bullet of same duration
- Curve moves differ at each end
- Rebalance costs
Data it needs
- daily adjusted closes
- additional inputs ARCANE lacks
Treasury ETFs SHY and TLT approximate the ends.
How ARCANE uses it
Alpha can describe a barbell as a hedged-rate stance for a curve Call (paper only).
Builds in the symphony builder. Fixed-weight mix of a short ETF and a long ETF.
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, §5.3, p. 70 of the SSRN version. Described in our words. Carry is ARCANE’s filing, not the book’s.