Quants tout alternative carry trades for the ‘new normal’

Low rates and flatlining yield curves leave investors seeking carry in swaps and swaptions

The fixed income carry trade, an engine of quant investing for years, has stalled. Returns on the strategy plummeted in 2020, after the Covid-19 pandemic dragged down interest rates towards zero.

In other asset classes – notably commodities – carry has thrived. But the failure of the strategy in fixed income leaves a hole that investors are uncertain how to fill.

Quants have suggestions, though. Among them are a series of new systematic strategies that seek carry in unorthodox places.


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