Estimating Bond Carry from Yield and Repo Rates

Summary

The document asks how a bond carry approximation based on the difference between yield to maturity and the repo rate is derived. It considers whether yield to maturity can stand in for running yield, defined as coupon income relative to price, and suggests scaling the annualized rate difference by the fraction of a year until delivery, using a 360-day convention.

The post raises a practical fixed income question but does not provide an answer, derivation, worked example, or supporting evidence. The proposed approximation is therefore a hypothesis rather than an established result in the document. Its accuracy and applicability are not assessed; in particular, the treatment of financing, bond price changes, and the choice of day count are left unresolved.

Key ideas

• The post asks whether yield to maturity minus repo rate approximates bond carry.
• It suggests that the approximation may treat yield to maturity as close to running yield.
• It proposes scaling an annual rate difference by the fraction of a year remaining until delivery.
• The document does not establish the approximation or discuss when it is accurate.

Tags

# Bond approximations


# Bond approximations












I was wondering where a couple of bond math approximations came from (aside from just 'feel'):



- I've seen one which is (YTM - Repo) which is approximately equal to carry. Is this because we are assuming YTM is approx equal to Running Yield of the bond (where Running yield = Coupon Income/Price). Furthermore, this is an annual number so it would probably need some scaling. i.e. (YTM-Repo) x (days to delivery/360).

Many Thanks

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