The Day The Carry Trade Died (Again)

Tyler Durden's picture

Another day, another 3-sigma swing in one of the biggest and most important FX carry-trades. AUDJPY is collapsing this morning as the smell of leveraged trades being tapped on the shoulder is all too fresh. Critically, carry trades are predicated on leveraging low returns in a low-volatility world; the shocks from a few weeks ago saw carry unwinds en masse - but all it took was a handful of Fed officials and Draghi/Carney's chatter and they are backing up the truck of the carry-express once again - that is until yesterday when the Minutes and Bernanke stepped up the currency wars once again. This kind of incredible volatility - unless everyone in the world is now a non-MtM trader - means fewer carry trades (or perhaps just a shift to another leveragable position).



Charts: Bloomberg

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DeadFred's picture

It's a well known fact that markets do well with huge spikes and dips every day. LOL

falak pema's picture

what happened to the FX traders who are long on USD/Eur etc. Do they get monkey hammered?

Will this trend last now that FED/BEN are saying taperig is something that as flexible as "read my lips" was?

SheepDog-One's picture

Yes no matter what happens ever, it can all be fixed just by a Fed head coming out and saying something, reality be damned it's all fixed by promises of more debt.

fonzannoon's picture

At least things are calming down a bit. Oil dropping, gold heading slightly lower, bond prices heading slightly lower and the safe haven Nasdaq/dow/S&P heading up.

gjp's picture

yet another in a relentless string of nauseating days

I'm with you fonz, as much as I wish it were otherwise, I see no evidence of TPTB losing control at this point

SheepDog-One's picture

Hey as long as stawks are goin up, it's ALL GUD!

Dr. Engali's picture

This chaos is intentional as they lead us towards a "need" for a world currency in order for businesses to better plan. After all how are they supposed to hedge with currencies bouncing all over the place. Plus it's for the children, we want to afford them the opportunity to be debt slaves too.

LawsofPhysics's picture

All these bullshit governments devaluing their paper promises around the world.  If only there was a universally accepted element/compound/molecule of value that could not be gamed in order to settle trade accounts...

got physical?

SheepDog-One's picture

What? There's nothing to fear here, Bernank got the free moneys comin forever!

...out of space's picture

...and here go welth efect to

toadold's picture

Let me check my special Bernanke financial clock,,"KOO KOO, KOO KOO,KOO KOO." Ayup a clock that winds people up.

bdub2's picture

I'm certain this is standard fare. Carry on minions...