Negative Carry
A situation in which the cost of financing a securities or financial futures position exceeds the yield earned.
Investopedia Commentary
A negative carry would occur if an investor borrowed $1000 at 12.5% and used the $1000 to purchase a bond yielding 9.5%. The bond's coupons would not cover the interest owing, so the investor would end up paying 3% to make the investment.
An investor might, however, achieve a positive after-tax yield if the bond is tax-exempt and interest on the loan is tax-deductible.
Related Links
Bond Basics Tutorial
Advanced Bond Concepts
See also: Bond, Cost of Carry, Futures, Positive Carry, Yield
negative carry