Country Yields via Short Date FX Swaps

Topic: Business Commentary

Comment: Worth revisiting the yields for each country. A number of the developed world interest rates have bottomed out and are gradually moving higher. You will want to keep an eye on the current rate vs the 10 day average. Two that are telling an interesting story would be GBP and HKD. Both struggling to gain ground from historic lows. GBP in particular will need to see a move higher in order to justify cable moving above 1.3000 on the spot.

The Hong Kong Dollar is another country that has different forces starting to impact it's economy, expressed through the exchange rate. The HKD is fixed against the dollar and will see central bank intervention to maintain the stable cross rate. The interest rates should also move in lock step with US interest rates. That appears to be not happening this time around as HK rates are about half the US. I believe this is an interesting view into the capital flows from both China retail (that makes up about 20% of the volume) along with the institutional Chinese clients. The HK equity market was up close to 40% this year until recent profit taking has come in. These client flows when moved into HK create a short CNH/long HKD position for the investors. The recent reversal of the trend (strong CNY/weak HKD) is an added force around this profit taking. The retail flow must return to China markets because of regulations, but the larger Chinese institutions appear to be moving into Europe and US equity markets. You will want to watch the level of HKD and its interest rates via FX swaps that we at Overlay Capital calculate and publish daily. 


Country Yield 10 Day Average Yield
Turkey - TRYUSD 11.541 11.402
Russia - RUBUSD 8.192 8.280
South Africa - ZARUSD 6.966 7.367
Mexico - MXNUSD 6.756 6.831
New Zealand - NZDUSD 1.852 1.854
Australia - AUDUSD 1.632 1.652
Thailand Baht - THBUSD 1.594 -1.187
Poland - PLNUSD 1.239 1.209
USA - USD 1.160 1.151
China - CNHUSD 1.020 1.561
Canada - CADUSD 0.745 0.575
Norway - NOKUSD 0.448 0.381
Romania - RONUSD 0.420 0.273
Singapore - SGDUSD 0.368 0.507
Israel - ILSUSD 0.156 -0.175
Hong Kong Dollar - HKDUSD 0.055 0.036
United Kingdom - GBPUSD 0.051 0.052
Hungary - HUFUSD -0.210 -0.341
Japan - JPYUSD -0.465 -0.344
Euro Member Countries - EURUSD -0.619 -0.628
Czech Republic - CZKUSD -0.764 -1.525
Sweden - SEKUSD -0.801 -0.809
Denmark - DKKUSD -0.815 -0.776
Switzerland - CHFUSD -1.124 -1.038



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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