Negative Carry

Filed Under: , ,
Dictionary Says

Definition of 'Negative Carry'


A situation in which the cost of holding a security exceeds the yield earned. A negative carry situation is typically undesirable because it means the investor is losing money. An investor might, however, achieve a positive after-tax yield on a negative carry trade if the investment comes with tax advantages, as might be the case with a bond whose interest payments were nontaxable.



Investopedia Says

Investopedia explains 'Negative Carry'


A negative carry would occur if an investor borrowed $1,000 at 12.5% and used the $1,000 to purchase a bond yielding 9.5%. The bond's coupons would not cover the interest owing, so the investor would end up paying 3% to make the investment.



comments powered by Disqus
Hot Definitions
  1. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
  2. IPO ETF

    An exchange-traded fund that focuses on stocks that have recently held an initial public offering (IPO). The underlying indexes tracked by IPO ETFs vary from one fund manager to another, but index IPO ETFs are usually passively managed and contain equities that have recently been offered to the public.
  3. IPO ETF

    An exchange-traded fund that focuses on stocks that have recently held an initial public offering (IPO). The underlying indexes tracked by IPO ETFs vary from one fund manager to another, but index IPO ETFs are usually passively managed and contain equities that have recently been offered to the public.
  4. Maritime Law

    A body of laws, conventions and treaties that governs international private business or other matters involving ships, shipping or crimes occurring on open water.
  5. Maritime Law

    A body of laws, conventions and treaties that governs international private business or other matters involving ships, shipping or crimes occurring on open water.
  6. Lending Freeze

    A period of time when banks either do not have excess money to loan or implement strict rules regarding loan qualification so that less lending is approved.
Trading Center