Carry, roll-down, and the patience of a mid-curve holding
Duration decisions often hide a quieter question: whether the yield curve still pays you to wait in the sector you already own.
Portfolio conversations jump quickly to “extend or shorten.” Before that fork, ask whether the curve still rewards sitting still. Carry and roll-down are old ideas; they remain useful when the mid-curve is quiet and headlines are loud.
Separate income from shape
Carry answers how much income you earn if yields do not move. Roll-down answers how the bond’s yield changes as it ages down a positively or negatively sloped sector. A steep mid-curve can justify patience even when you dislike the macro story of the week.
When patience fails
If auctions repeatedly cheapen your sector, roll-down assumptions break. That is a supply problem, not a failure of the concept. Fixed-income yield curve tracking should flag those breaks early — ideally in the briefing before you add another clip “because the curve is steep.”
A committee-friendly sentence
“We hold the seven-year because roll-down still pays after expected auction pressure, not because we forecast a rally.” Sentences like that keep duration debates honest.