To fund or not to fund?

Yen still king as funding currency, but bonds trump FX carry

purse-squeeze

After the European Central Bank (ECB) implemented negative deposit rates in the eurozone last month, the euro emerged as a potential alternative funding currency to the yen for carry trades – a strategy that was hugely popular before the financial crisis and is coming to the fore once again as a potentially winning formula.

But, with volatility lingering near historic lows and interest rates in major economies stagnating around zero, strategists are divided on whether carry trades could make a

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