Estimate the expected return from holding a Treasury bond over a
specified horizon, broken into two components: carry (income over
funding cost) and rolldown (price appreciation from sliding down
the yield curve).
Instructions
- select a Horizon — 3 Mo, 6 Mo, or 1 Yr holding period
- enter a Funding Rate — defaults to the current 3 Mo Treasury yield
- click GO to compute returns for all tenors
Results
- Yield — current par yield for each tenor
- Carry (bps) — income earned above the funding rate over the holding period: (yield − funding rate) × horizon
- Rolldown (bps) — price appreciation from the bond "rolling down" to a shorter maturity on an unchanged curve, estimated via modified duration × yield change (PCHIP-interpolated)
- Total (bps) — carry + rolldown; the expected total return if the curve does not change
The chart shows carry (blue) and rolldown (lighter blue) as stacked
bars for each tenor, making it easy to identify the sweet spot —
the maturity offering the best risk-adjusted total return.
Use Cases
- identify the tenor with the highest carry + rolldown ("sweet spot" trade)
- compare the carry cost of being short the front end vs. the rolldown benefit of owning the belly
- evaluate whether the yield curve offers enough rolldown to justify extending duration
- understand how inverted curves flip the carry and rolldown dynamics
Notes
- carry is simple: yield minus funding rate, scaled by horizon
- rolldown assumes the yield curve shape does not change over the holding period
- rolldown uses PCHIP interpolation to estimate the yield at the post-horizon maturity
- negative total return on some tenors is normal when the curve is inverted
Per-tenor/horizon pages (e.g. /rolldown/10-year/1-year) show the
carry and rolldown breakdown for a specific maturity and holding
period at current yields.