Could someone please explain the carry and roll trade that a lot of traders are doing with negative euro debt?
I read an example that they borrow in the repo market then buy a longer dated bond to generate positive carry - but can someone please explain the repo part? They would have to own a short dated bond to be able to repo it to get financing to purchase the long dated bond right? If so, shouldn't the cost of purchasing the short dated bond be factored into the profit calculations?