Carry and Roll Down
Carry and Roll Down — Expected return from holding higher-yielding tenor as it rolls down a positively sloped curve.
Definition
Carry and Roll Down refers to expected return from holding higher-yielding tenor as it rolls down a positively sloped curve. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Duration, curve, and carry decide whether a macro view survives into P&L. When expected return from holding higher-yielding tenor as it rolls down a positively sloped curve shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what carry and roll down is saying. If expected return from holding higher-yielding tenor as it rolls down a positively sloped curve moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
Always state the tenor and roll-down assumption; parallel-shift shortcuts hide curve risk. Prefer a short written null hypothesis for Carry and Roll Down: what would falsify the current reading in the next window?
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