Carry is the 'do-nothing' return — the profit you earn from simply holding a bond while nothing else changes. It primarily comes from coupon accrual: as days pass, you accrue interest income. In leveraged contexts, carry is net of funding costs (repo or financing rates). For example, if a bond yields 5% and you finance it at 3%, your carry is ~2%. Traders distinguish carry from price appreciation caused by rate or spread movements. A 'positive carry' position earns money as time passes even if markets are static, while 'negative carry' bleeds value over time. Carry strategies focus on this time-decay component rather than betting on directional price moves.