%0 Journal Article %A Pavan Wadhwa %A Kedran Panageas %T Boosting Carry in a Negative Rate World %D 2012 %R 10.3905/jot.2012.8.1.009 %J The Journal of Trading %P 9-14 %V 8 %N 1 %X The current environment of low/negative yields makes it difficult for fixed-income investors to earn attractive risk-adjusted returns. To address that problem, we analyze five low-risk sources of carry for real-money investors, including 1) going up the sovereign yield curve; 2) going down the sovereign credit curve; 3) going down the credit curve using agencies, highly rated corporates, covered bonds, and asset-backed security (ABS) or mortgage-backed security (MBS); 4) creating synthetic, higher-yielding, government bond exposure using the foreign exchange (FX) basis market; and 5) selling sovereign credit default swap (CDS) protection to take advantage of wide credit spreads relative to the cash market. We specifically avoid sovereign sectors with excessive duration or credit risk, such as Spain or Italy. We conclude that while there is relatively little carry left in sovereign yield curve and sovereign credit curve trades, risk-adjusted carry remains attractive in corporate credit, ABS/MBS, and derivative strategies (FX basis and CDS).TOPICS: Credit default swaps, fixed-income portfolio management, fixed income and structured finance %U https://jot.pm-research.com/content/iijtrade/8/1/9.full.pdf