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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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61 votes
3 answers

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%?
Michael Pryor's user avatar
29 votes
8 answers

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 ...
AspiringMat's user avatar
13 votes
2 answers

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 ...
Joseph Tanenbaum's user avatar
3 votes
1 answer

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 ...
CQM's user avatar
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2 votes
2 answers

Carry trading using forward contracts

I am curious as to how someone performs a carry trade using forward contracts. I've read that you go long on the currency that has the higher interest rate but this confuses me. In particular, I've ...
qp212223's user avatar
  • 137
0 votes
1 answer

Can a non-Turk borrow Turkish lira?

Turkey is currently on the cusp of a hyperinflation apparently triggered by its president's policy of maintaining nominal interest rates far below inflation. Thus Turkish banks are currently giving ...
Kevin Carlson's user avatar