Buy 10 year treasury financed by simultaneous repo
Swap 10 year treasury bond based on 10 year swap rate and receive 3 month float.
Since 10 year treasury was higher than 10 year swap rate, you have a positive carry on the whole.
As the 10 year gov/swap narrow in recent month, I think the trade above should be losing money.
I couldn't really identify how, please help.
In general, what are the risk with the trade above.
Also, if I want to bet that the gov/swap spread is going to narrow ie gov - swap move from negative to positive, what are some of the ways I can structure this trade.
Many many thanks,
Newbie