From the course: Applied Fixed Income

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Carry and roll of the yield curve

Carry and roll of the yield curve

From the course: Applied Fixed Income

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Carry and roll of the yield curve

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- [Instructor] When we talk about the yield curve, we talk about the concepts of carry and roll. From a trading perspective, the shape of the yield curve is mostly measured 2's and 10's, meaning the difference between the CT2 and CT10 yields, or 2's-30's, which is the difference between CT2 and the bond yield. Now, it captures enough of the short term and longer term yields, and it allows the trader to form an opinion on whether they think the curve is too steep or too flat versus where the economic cycle is. Now, traders also look at spreads between other 10's based on whichever sector they're looking to trade. Now let's look at a couple of yield curves here. I have the US Treasury Actives Curve graphed here at two different points in time. Remembering that a yield curve is a snapshot at a point of time of the borrowing cost for a certain issuer or group of issuers for a range of maturities. So the yield curve is not a historical graph and does not show changes in yields over time…

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