|
PureBytes Links
Trading Reference Links
|
There is an inherent exchange rate risk in such trades which you would have
to hedge by buying Yen futures/options/forward contracts. This effectively
negates profit.
This is because the hedging actions of yen accounts looking to invest yen in
higher yielding currencies forces up the price of yen futures.
This premium leaks away towards contract expiration of your hedging
contract, leading to a loss of the extra interest you gained by going into
that currency.
So you can do it but you either hedge and don't gain anything, or you don't
hedge and take a risk on the exchange rates.
Adam
-----Original Message-----
From: tagteam@xxxxxxxxxxxxx <tagteam@xxxxxxxxxxxxx>
To: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
Date: Friday, October 15, 1999 9:20 PM
Subject: Re: Japanese > US Bonds
>>....Profit by investing in US Bonds = Yen 5,587....
>>Am I missing something , or is this being done in real life.
>
>Yeah, they're called "carry" trades, right.........sell (borrow) JY and buy
>U.S. Bonds? I thought most of those were unwound already, though.
>
|