SG Talk

Ironically many now sing the song of Yen carry trade unwinding because of fear that USA is in a recession or soon.

But look at CD yield and the borrowing cost of Yen, can easily risk free get 7%... Yen cannot go back to 75 to USD... It will just get back on track given 4 decades of carry trades...

Just to add, I suspect Fed will not cut rates in sept, election in Nov...

What is carry trade

(06-08-2024, 10:15 AM)Talent Wrote: [ -> ]What is carry trade

Borrow Yen to invest in USD or other currency assets. The simplest is borrowing Yen and by US bonds. You do nothing and risk free earn 7%.

The problem is that when a global recession comes, all markets will collapse and so will all rates and Japan can only go that low. End of the day, still the same, most will get into USD and wait for opportunities to buy US stocks because they continue to have the leadership in the industries and their companies are worth investing in. All other markets are typically followers. Analyst usually exclude Japan and even China for big cycle plays.

(06-08-2024, 10:24 AM)Sticw Wrote: [ -> ]Borrow Yen to invest in USD or other currency assets. The simplest is borrowing Yen and by US bonds. You do nothing and risk free earn 7%.

Still can do?
How to borrow yen to buy us bonds
Plse list the step thx
Yen just move 25 basis point
Is such volcano effect on stickmarket

(06-08-2024, 11:29 AM)Talent Wrote: [ -> ]Still can do?
How to borrow yen to buy us bonds
Plse list the step thx

Big institutions can just sell Yen buy USD. Then use the USD to buy CD. CD still offering 7% so this alone is attractive.

Some argues that there is exchange risk, but Yen doesn't pay interest and likely going back to negative interest again, so no demand for Yen other than holidaying. The Yen has very limited value to appreciate.

The Boj did the right thing to shock the economy for reset, but the timing is very wrong... I now half suspect they did so cos they knew the economic numbers beforehand and just wanted to ease the recession play...