A situation that arises when the cost of financing a financial instrument or a physical asset (e.g., a commodity)- that is, its cost of carry-, such as short-term rate of interest, insurance costs, and storage costs, exceeds the current return (income) of that financial instrument or physical asset.
In the context of financial futures, such as stock index futures, negative carry results when yields are less than short-term interest rates. In which case, the dividend payout from holding and carrying the financial asset (stocks) is less than the cost of financing.
