+ve carry in treasury market

In many markets, cost of carry is a cost to a holder of a security, because …. frequently it’s bought under borrowed money. A typical short term interest is 200%/yr, around 0.5bps/day.
In the Treasury market (perhaps in agency and muni too), each day you earn accrued interest, which is typically 500bps/yr or about 1.5bps/day. Positive carry.

The earlier a buyer settles the trade, the earlier she starts earning accrued interest[1]. As a result, the earlier a buyer settles, the higher the price to pay.

This reminds me “start investing in 401k early, so you start earning returns”

http://bondtutor.com/btchp5/topic3/topic3.htm has numeric examples

http://glossary.reuters.com/index.php?title=Cost_of_Carry points out that in the comm market cost of carry means storage cost.


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