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Could someone please explain to me how positive carry is achieved when the repo rate is negative?

For example I can see the German repo rate is -0.57% and the 2 year German bund is -0.78%. So to generate a positive carry, am I paying or receiving the -0.57%?

I think I am paying the -0.57% (which means I am receiving this?) and then with the cash I go off and buy the 2 year bund at -0.78%. Is that correct? If so, is my positive carry -0.79 + (-0.57) = -0.21%

But that is still a negative yield so what am I doing wrong???

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  • $\begingroup$ what do you mean by carry here. People think about difference things when they talk about carry. If it is about the expected cash flow of holding a bund for a period, if you case, you would have negative carry. $\endgroup$ – PeacePanda Oct 2 '19 at 21:58

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