carry trade
Borrow low, invest
A carry trade is a financial strategy where an investor borrows money in a currency with low interest rates, then invests it in assets yielding higher returns—pocketing the difference.
The classic example involves borrowing Japanese yen at near-zero rates to buy higher-yielding bonds elsewhere.
Carry trades profit in stable conditions but can unwind violently when exchange rates shift or volatility spikes: The yen carry trade collapsed when markets panicked.
- interest rateCost of borrowing money
- interestAttention, stake, or fee
- yieldProduce or relinquish
- borrowingTemporary taking of another's
- yenPersistent strong craving
leverage · currency · spread · low rates · arbitrage · risk · funding · Japanese yen · speculation · hot money · forex · emerging markets · differential · profit · risk off · hedge · position · swap
- forexforex, exchange rate, currency exchange, foreign exchange, bid price
- bond strategiesladdering, immunization, roll down, flattener, curve flattening
- Commodity Futuresfutures market, futures exchange, hedging, margin calls, delivery dates
- tradingbid, buy, ask, sell, orders
- Japan economyBank of Japan, yen, Nikkei, Tokyo Stock Exchange, bubble economy
- monetary policyinflation, central banking, deflation, central bank, money supply
carry tradeflight to safety
Shift toward secure assets
capital preservation · cash position · deleveraging · unwinding · risk aversion
carry, trade, carries, carried, carrying, carrier, carriers, carriage, carriages