The Yen Carry, Mapped: Yen Pairs vs Yield Differentials
Research preview
The yen’s relationship with global rates is one of the cleanest macro trades in FX — and it has two distinct drivers. Two legs of the carry trade The yen carry trade rests on two spreads. The 2-year differential captures relative policy expectations. The 10-year differential captures duration and term premium. Both matter, and they do not always move together. The 2-year spread USDJPY, EURJPY and GBPJPY against their respective 2-year spreads to Japan, shown weekly. The relationship held tightly through the 2022–2024 repricing and has loosened since....
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