Inside the 261bp Wedge Between USDJPY and Its Own Carry
Research preview
USDJPY is running about 261bp rich to the rate differential that explained it for a decade. The US 10-year yields 5.27%, the 2s10s spread is +49bp, and the yen has not followed. That gap is the trade. Below: the curve, the carry mapped pair by pair, and the levels with invalidation. The read: curve first, then carry, then the pair. On that sequence, USDJPY is 261bp off fair value. The US curve: level, slope, mechanism US 2s10s sits at +49bp — the 10-year at 5.273%, the 2-year at 4.785%....
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