Function Carry within with keys returns the at-the-money carry(ies) C of the referenced bond(s) between the bond settlement date Tˢ and a horizon date Tʰ, with Tˢ < Tᴴ and a given (or prices) Pᶜ as of Tˢ
Tˢ is the bond settlement date as implied by a trade transaction assumed to occur on the T₀ (typically today).
C is defined like in Bloomberg, as follows:
C is the portion of the potential return from a trade that is attributed to the net income earned between the various payments that are received and paid out between Tˢ and Tʰ
In general, positive carry represents an attractive trade.
The carry is calculated by the formula:
C = yʰ - yˢ
yˢ is the bond's spot yield calculated as of the settlement date Tˢ based on the supplied spot clean price Pᶜ as of Tˢ
yʰ is the bond's forward yield calculated as of the horizon date Tʰ based on an implied clean price as of Tʰ, calculated out of an assumed repo rate r as described in the function
Note, this definition corresponds to the choice TRUE for the key in the function on objects of type
Download the workbook bond-carryroll.xlsx that demonstrates the method described here.