Concealed carry

Spencer Andrews, Riccardo Colacito, Mariano M. Croce and Federico Gavazzoni

Journal of Financial Economics, 2024, vol. 159, issue C

Abstract: The slope carry takes a long (short) position in the long-term bonds of countries with steeper (flatter) yield curves. The traditional carry takes a long (short) position in countries with high (low) short-term rates. We document that: (i) the slope carry return is slightly negative (strongly positive) in the pre (post) 2008 period, whereas it is concealed over longer samples; (ii) the traditional carry return is lower post-2008; and (iii) expected global growth and inflation declined post-2008. We connect these findings through an equilibrium model in which countries feature heterogeneous exposure to news shocks about global output and global inflation.

Keywords: Carry trades; Yield curves; Global inflation risk (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:159:y:2024:i:c:s0304405x24000977

DOI: 10.1016/j.jfineco.2024.103874

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