Country Yields via Short Date FX Swaps

Topic: Business Commentary

Comment: China authorities went with another aggressive move against speculators who have stayed with a short CNH trade. As highligthed here after the moody's downgrade, we saw spot move above 6.89 and the yields via FX rates jump giving clients the opportunity to "load up" on CNH (May 24th). I thought the move would be contained below 6.8000. What I wasn't anticipating was that the Central Bank would jack rates from 3.5/4% to >40%! (check May 30th blog). This aggressive move was designed to wipe out gains that short CNH holders have been sitting on. If these spec funds failed to roll their trades out, they may have been crushed on both spot move, plus funding costs.

Watch the daily country yields we produce via the FX swap market for clues in CNH going forward.


Country Yield 10 Day Average Yield
China - CNHUSD 38.001 20.833
Turkey - TRYUSD 11.582 11.644
Russia - RUBUSD 8.981 8.702
South Africa - ZARUSD 8.020 7.943
Mexico - MXNUSD 6.498 6.988
New Zealand - NZDUSD 1.672 1.684
Australia - AUDUSD 1.587 1.622
Poland - PLNUSD 1.460 1.357
Thailand Baht - THBUSD 1.122 1.286
USA - USD 0.910 0.910
Singapore - SGDUSD 0.426 0.510
Canada - CADUSD 0.401 0.427
Norway - NOKUSD 0.344 0.372
Hong Kong Dollar - HKDUSD 0.059 -0.017
United Kingdom - GBPUSD -0.019 -0.014
Romania - RONUSD -0.066 -0.090
Japan - JPYUSD -0.355 -0.293
Israel - ILSUSD -0.440 -0.203
Hungary - HUFUSD -0.528 -0.304
Euro Member Countries - EURUSD -0.788 -0.757
Sweden - SEKUSD -0.951 -0.780
Denmark - DKKUSD -0.951 -0.911
Switzerland - CHFUSD -1.194 -1.142
Czech Republic - CZKUSD -1.221 -1.213



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

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