A Butterfly in Tokyo and Carry Trade

The tectonic plates of global finance continue to move.

The Magnificent Seven are down 21% from the peak

Last week, Germany unveiled plans for the most dramatic expansion of fiscal policy since the nation reunified in 1990. 

Meanwhile, Japan seems to have broken out of a deflationary slump that started that same year — although nobody wants to say this too loudly. 

The 10-year yield on Japanese government bonds has leapt to 1.6%, its highest since the 2008 Global Financial Crisis

Low Japanese bond yields have provided a source of cheap funding for the rest of the world — simply borrow in Japan at negative rates, park in an investment that actually pays a return, and feast on the difference. 

The rise in JGB yields has narrowed the differentials with other bonds — particularly Mexico, whose high rates made it a popular carry trade destination

John Authers Bloomberg 11 mars 2025

https://www.bloomberg.com/opinion/articles/2025-03-11/add-to-moving-parts-list-japan-selloff-carney

Börsen i Stockholm och New York 4-5 augusti 2024

https://englundmacro.blogspot.com/2024/08/borsen-i-stockholm-och-new-york-4-5.html

New York 7 augusti 2024 - Carry Trade Nasdaq Down

https://englundmacro.blogspot.com/2024/08/borsen-i-stockholm-och-new-york-7.html

The root of the problem is the yen carry trade

https://englundmacro.blogspot.com/2024/08/the-root-of-problem-is-yen-carry-trade.html

Tillbaka till Rolfs länktips 12 mars 2025

https://englundmacro.blogspot.com/2025/03/rolfs-lanktips-12-mars-2025.html