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Carry is the return on a government bond if the yield curve does not change, and depends on the steepness of the yield curve. According to academic research, investors can outperform the government bond market by using carry for market timing, country allocation, and yield curve positioning. We want to take it one step further and investigate an investment strategy for individual government bonds based on the carry concept.
Beekhuizen, Duyvesteyn, Martens, and Zomerdijk (2016). Carry Investing on the Yield Curve. Working paper. https://ssrn.com/abstract=2808327
Duarte, Longstaff, and Yu (2007). Risk and Return in Fixed-Income Arbitrage: Nickels in Front of a Steamroller? Review of Financial Studies 20 (3), 769-811
Fama (1984a). The information in the term structure. Journal of Financial Economics 13, 509-528
Koijen, Moskowitz, Pedersen, and Vrugt (2015). Carry. Working paper. https://ssrn.com/abstract=2298565