negative carry

Negative carry

Related: Net financing cost

Negative Carry

A situation in which an investment has a lower yield than the cost of funding for it. For example, an investor may borrow money at 6% interest to invest in a restaurant with only a 4% yield. In this case, the investor has a negative carry of 2% and is actually spending money to invest in the restaurant. One may think of a negative carry as a bad investment, but it sometimes results in a net profit if the interest on the cost of funding is tax deductible and the investment itself is a tax free security, such as a municipal bond.

negative carry

The net cost of an investment position when the investment's cost of carry exceeds its current income. For example, buying a bond with a current yield of 10% and financing the purchase with money borrowed at 13% will result in a negative carry. Compare positive carry. See also carrying charges.

单词	negative carry
释义	negative carry Negative carry Related: Net financing cost Negative Carry A situation in which an investment has a lower yield than the cost of funding for it. For example, an investor may borrow money at 6% interest to invest in a restaurant with only a 4% yield. In this case, the investor has a negative carry of 2% and is actually spending money to invest in the restaurant. One may think of a negative carry as a bad investment, but it sometimes results in a net profit if the interest on the cost of funding is tax deductible and the investment itself is a tax free security, such as a municipal bond. negative carry The net cost of an investment position when the investment's cost of carry exceeds its current income. For example, buying a bond with a current yield of 10% and financing the purchase with money borrowed at 13% will result in a negative carry. Compare positive carry. See also carrying charges.
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