#122: Any Interest in the Carry Trade

S2N Spotlight

Everyone is talking about the carry trade unwind. I thought I would look at the Yen futures to see what is happening with open interest and see if there is any evidence of an unwind. Open interest represents the total number of active futures contracts in the market. If I observe a significant decrease in open interest, it might indicate that traders are closing their positions, which could be a sign that the carry trade is unwinding.

Open Interest has clearly dropped from its highs but is hard to see in this chart with 40 years of history. I will keep an eye open on this one, as the carry trade has been a major source of funding into riskier assets.

S2N Observations

5-year inflation expectations have dropped considerably. See the red line. Clearly, gold traders have other views as gold is back at all time highs.

To end off a short one for today, you can see the spike in the put/call ratio last week. If you were able to sell some short-term volatility, you would have done really well.

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