Questions tagged [carry-trade]

A carry trade is typically based on borrowing at a low interest rate and investing in an asset that provides a higher rate of return.

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8answers
14k views

What stops you from using fixed income in developing countries? [duplicate]

I was recently visiting a developing country and noticed that their interest rates are very high — ~15% with government bonds promising ~13% annually. I was just thinking, if the bid ask spread for ...
3
votes
1answer
691 views

Understanding bond margin, carry trade fundamentals

US Treasuries that have less than 6 months till maturity allow for 100x leverage, as the regulatory requirement is to put 1% of the market value down for each bond. So a $1,000,000 account could hold ...
61
votes
3answers
6k views

How can I invest in country A to take advantage of their great interest rate while I live in country B?

If I live in the US, for example, where current interest rates are practically nil, how can I take advantage of the fact that interest rates in Australia are almost 5%?
12
votes
2answers
718 views

Why does the currency carry trade work?

I understand the carry trade mechanism, but I wonder why it works, or why it doesn't work. Each currency has an interest rate associated with it. The Yen (JPY) has historically had a very low ...