Rolldown and carry analysis for a 2 Yr Treasury held over a 6 Mo horizon, based on the yield curve as of July 24, 2026. Estimated carry is 18.5 bps, rolldown return is 15.8 bps, for a total expected return of 34.3 bps. Rolldown return captures the price gain from a bond moving down the curve as its remaining maturity shortens, assuming the yield curve shape stays constant.
| Yield | Carry | Rolldown | Total |
|---|---|---|---|
| 4.33% | 18.5 bps | 15.8 bps | 34.3 bps |
Assumes unchanged yield curve and 3 Mo funding rate.
Carry and rolldown decompose the expected return of holding a bond over a given horizon assuming the yield curve does not change. Carry is the income earned from holding a higher-yielding bond funded at the short-term rate — for the 2 Yr Treasury over a 6 Mo horizon, this reflects the spread between the 2 Yr par yield and the 3 Mo funding rate. Rolldown is the capital gain (or loss) from the bond "rolling down" the curve as its remaining maturity shortens and it reprices at a lower yield point on an upward-sloping curve. A total return of 34.3 bps means an investor would earn approximately that annualized return in excess of the funding rate if curves remain unchanged. Positive total return suggests the position is self-financing; negative total return indicates the investor pays to maintain the position, betting on a rate decline or other catalyst.
The 2 Yr currently offers positive carry of 18.5 bps over the 6 Mo horizon, meaning the bond yields more than the short-term funding rate and the position generates net interest income on its own. Rolldown adds 15.8 bps, reflecting an upward-sloping curve in the 2 Yr region. As the bond ages and its remaining maturity shortens, it reprices at a lower yield on the curve, generating a capital gain on top of carry income.