EM Carry Trade Posts Longest Run Since 2008 as Yields Top 40% in Turkey
Updated
Updated · Bloomberg · Aug 23
EM Carry Trade Posts Longest Run Since 2008 as Yields Top 40% in Turkey
2 articles · Updated · Bloomberg · Aug 23
Summary
Emerging-market carry trades have logged their longest winning run since 2008, extending a strategy that profits from borrowing in low-yield currencies and buying higher-yielding EM assets.
PGIM’s Cathy Hepworth, who helps oversee emerging-markets debt at the $1.5 trillion asset manager, called the theme her highest-conviction trade across developing markets: “Carry, carry, carry.”
The trade works by funding positions in cheap currencies such as the US dollar, Japanese yen or euro, then shifting that money into higher-yielding currencies and local debt.
Turkey illustrates the appeal: interest payments on lira bonds or money-market funds can reach 40% or more, underscoring why investors are chasing carry despite the strategy’s well-known risks.