Bond Carry as Accrued Interest Minus Repo Financing Cost

Summary

The document asks how to interpret bond carry for a financed position, including what yield means and how to identify the starting and ending accrued interest and bond price in a carry formula. It does not provide a formal answer or resolve those definitions; it is a request for clarification rather than a worked explanation.

The formula quoted in the question describes dollar carry as the change in accrued interest less the financing charge, calculated from the initial bond value including accrued interest, the repo rate, and the year fraction. The document does not specify a bond, holding period, market data, or calculation example. Consequently, it offers no evidence about carry performance and cannot establish how the formula should be applied in a particular convention. Readers would need additional definitions to distinguish clean and dirty price, determine the relevant accrual period, and connect the financing rate to a yield or break-even move.

Key ideas

• The document asks for a precise definition of carry on a financed bond position.
• It presents carry as accrued interest earned less a repo financing charge.
• It leaves the meaning of starting price and accrued interest unresolved.
• It does not explain how carry relates to a bond yield or provide a worked example.

Tags

# Definition of carry


# Definition of carry












Trying to understand this answer here, but having difficulty. Would appreciate it if someone formally, mathematically wrote down the precise definitions here.

https://quant.stackexchange.com/a/25330

What is a "financed position"?

> "how much yield can increase before a financed position starts to lose money"

What does this mean? Yield of what, exactly? What yield is this is? Is this yield-to-maturity, current yield, etc? Can someone write this down mathematically?

> In dollar terms, carry = (ending accrued interest – starting accrued interest) – (starting price + starting AI) x repo rate x year fraction

What is "starting"/"ending" accrued interest, "starting" price (is this the bond's clean price?).

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.