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What I don't understand is how a move to 0.25% is triggering the trade to unwind. Is the carry trade based on the delta between US rates and Japanese rates? If so there is still a pretty big difference between the US and JPY rates so why now? I'm sure there is nuance I'm missing.

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Replies (2)

npub1wgpe...d2ek 1 year ago

I think the nuance you’re not appreciating is the scale. It’s not a trade between Yen and USD, it’s between Yen and US stocks. Even a small increase in your borrowing cost makes a big difference if the position size is big enough.

XeqT Monetary Freedom (∞/21M) + (₿+⚡) = 🧡 XeqTMonetaryFreedom@BitcoinNostr.com 1 year ago

The change might seem insignificant, but it basically means that the borrowing cost more than doubled. It's akin to being able to pay $2,000 a month for your mortgage, but now, with a rate change, your mortgage is $4,000 a month.