A re-run of last summer’s turmoil?

 


A re-run of last summer’s turmoil where a rise in the Japanese yen caused chaos throughout financial markets is threatened by this weekend’s Japanese elections, a strategist warns.

Last summer, a sudden unwinding of the carry-trade in Japanese yen (whereby traders short the low-yielding Japanese currency to fund long positions in higher-yielding instruments elsewhere) caused chaos in financial markets. 

“if Japanese yields rise further following the election results, either U.S. Treasury rates will  increase in tandem or the spread between Treasurys and JGBs will narrow, bringing the yen carry-trade back into the spotlight.” 
MarketWatch 21 July 2025
https://www.marketwatch.com/story/how-shockwaves-from-japanese-elections-could-reverberate-in-the-u-s-bond-market-65fe8d4c


Carry Trade - The Usual Suspect
Joseph Adinolfi MarketWatch 5 August 2024
https://englundmacro.blogspot.com/2024/08/carry-trade-usual-suspect.html


Market crashes usually have the same mechanism - Unwinding of carry trades is helping
Matt Levine Bloomberg 5 August 2024
https://englundmacro.blogspot.com/2024/08/market-crashes-usually-have-same.html




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