Country Yields via Short Date FX Swaps

Topic: Business Commentary

Comment: China yield continues to grind higher, getting an added boost from Moody's downgrade. With elections coming in the fall, you may want to load up on the currency, and let the growing dividend (via rolling spot) come in. No way the Government will allow the currency to weaken much, and when the market tries like yesterday, you buy more currency. I would look to take the trade off below 6.8000. I can see a 6.77/6.92 range until the election is secured by President Xi.

 

Country Yield 10 Day Average Yield
Turkey - TRYUSD 11.701 11.440
Russia - RUBUSD 8.623 8.638
South Africa - ZARUSD 8.105 7.541
Mexico - MXNUSD 7.414 6.930
China - CNHUSD 3.786 2.454
New Zealand - NZDUSD 1.646 1.663
Australia - AUDUSD 1.634 1.658
Poland - PLNUSD 1.428 1.398
Thailand Baht - THBUSD 1.328 1.763
USA - USD 0.910 0.910
Singapore - SGDUSD 0.482 0.608
Canada - CADUSD 0.457 0.391
Norway - NOKUSD 0.363 0.403
Romania - RONUSD 0.060 -0.093
United Kingdom - GBPUSD 0.025 0.011
Hungary - HUFUSD -0.003 -0.183
Hong Kong Dollar - HKDUSD -0.052 -0.023
Japan - JPYUSD -0.264 -0.323
Israel - ILSUSD -0.282 -0.378
Sweden - SEKUSD -0.657 -0.742
Euro Member Countries - EURUSD -0.661 -0.698
Denmark - DKKUSD -0.798 -0.828
Switzerland - CHFUSD -0.982 -1.089
Czech Republic - CZKUSD -1.051 -0.979

 

 

Creating Yield through Currency Swaps - The world of Overnight Money Markets and the Foreign Exchange Markets are closely related. As interest rates rise and fall, a form of arbitrage opportunity presents itself in the Foreign Exchange Market. This form of Carry Trade creates new price discovery mechanism for the Overnight Money Market that eventually brings equilibrium between the overnight interest rates in domestic money markets and those achieved in the OTC FX swap markets.

 

 

The OTC FX swap market represents the interest rate differential between two countries. By using the FX swap market prices and the federal reserve effective fed funds rate, we are able to generate daily yields for each country. Combining this with our Adaptive Hedging Methodology creates a unique Adaptive Carry strategy. 

Email us for more information about our yield generating Adaptive Carry strategy info@overlaycapital.com

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