positive carry
Positive carry is when the money you borrow earns more than it costs you, so holding the position pays you while you wait.
In plain English
A lot of people take a loan and just sit with it, not realising the loan itself is calmly working against them or, if they are lucky, calmly working for them. Someone borrows ₦2,000,000 at 10% to buy a bond paying 15%. They never sit down to ask which way the maths is leaning. They just feel vaguely uneasy about owing money, without noticing they are actually being paid to owe it.
That feeling right there, that discomfort with debt even when the numbers favour you, is the mistake. Positive carry is simply what happens when the income you earn from holding an asset is bigger than the cost of the money you used to buy it. The gap between the two, paid to you, is the carry. It is not a trick or a loophole. It is just arithmetic done properly instead of by vibes.
Say a Nigerian investor borrows at 12% from a bank to buy a government bond yielding 18%. Every month, the bond pays more than the loan demands. That 6% difference sits in the investor's pocket as long as both rates hold steady. This is positive carry. It is why some traders happily hold borrowed positions overnight or for months, because the position is feeding itself.
In the United Kingdom, someone might borrow on a low fixed rate mortgage and put spare cash into a savings account or bond paying more than that mortgage rate. As long as that gap survives, they are enjoying positive carry too, even if nobody at the dinner table calls it that.
For someone abroad sending money home, the same logic applies to holding naira denominated treasury bills funded by cheaper foreign currency debt, though currency risk can eat into that gap fast. Carry looks sweet until the exchange rate decides to have an opinion.
The opposite, negative carry, is when the cost of holding something is higher than what it earns you. That is the calm, expensive mistake many people make without ever pricing it out.
An investor borrows ₦5,000,000 at 11% annual interest and invests it in a bond paying 16% annual yield. The 5% difference, about ₦250,000 a year, is positive carry, money earned simply for holding the position.
Questions people ask
Is positive carry the same as profit?
Not quite. It is the income gap between what you earn and what you pay to borrow. You can still lose money overall if the asset's price falls, even while enjoying positive carry on the income side.
Can positive carry turn negative?
Yes. If interest rates rise on your loan or the yield on your asset falls, a comfortable positive carry can flip into negative carry quite quickly, so it needs watching, more than setting and forgetting.
Does positive carry apply outside bonds?
Yes. It shows up in currency trading, property bought with a mortgage that costs less than the rent it earns, and any situation where borrowed money funds something that pays more than the loan costs.
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