Carry trade and shorting yuan

[sleepydragon]

Scott Bensset’s financial disclosure showed he’s shorting yuan and jpy, and long bitcoin and spy.

 

In IBKR, you can do a spot fx trade of selling JPY and get USD back. The JPY will be a margin loan with interest rate of 1.5%, and the USD can early 4.x+%.  I am thinking if my account is currently leveraged and use margin, won’t it be a good idea to use this trade to make my USD margin balance become 0, and I in effect borrowing in JPY ? I wonder this is doable (if ibkr will require me to keep positive USD balance as collateral for the fx trade).

 

In addition, i could also short CNH but the interest rate is much higher. Maybe I can use futures but will have to roll it every 3 months which are expensive.

 

Wonder anyone here is doing these kind of trade? 

[Luke]

17 minutes ago, sleepydragon said:

Scott Bensset’s financial disclosure showed he’s shorting yuan and jpy, and long bitcoin and spy.

 

In IBKR, you can do a spot fx trade of selling JPY and get USD back. The JPY will be a margin loan with interest rate of 1.5%, and the USD can early 4.x+%.  I am thinking if my account is currently leveraged and use margin, won’t it be a good idea to use this trade to make my USD margin balance become 0, and I in effect borrowing in JPY ? I wonder this is doable (if ibkr will require me to keep positive USD balance as collateral for the fx trade).

 

In addition, i could also short CNH but the interest rate is much higher. Maybe I can use futures but will have to roll it every 3 months which are expensive.

 

Wonder anyone here is doing these kind of trade? 

Unfortunately carry trades are not allowed on EU IB Irish branche. Otherwise i would short the Yen and borrow a lot and then convert it to USD and buy US assets no problem.

 

If your IB branche allows this to me this is a pretty amazing longterm bet against japan, declining birthrate, high debt etc by profiting from appreciation in US assets.

 

Worst case you lose 30%ish if the yen appreciates for several reasons which you should technically be able to make back over the longterm in buying proper US assets.

 

I like the bet but cant do it.

[gfp]

There are no extra points awarded in this business for degree of difficulty.  Keep it simple and focus on a few things you come to understand deeply.  Even Buffett, who is a top rated, very large, corporate issuer of grade-A interest-only Japanese paper, only uses the proceeds to fund Yen based investments in Japan (although several of those trading companies have significant business in USD as well).  

[sleepydragon]

1 hour ago, gfp said:

There are no extra points awarded in this business for degree of difficulty.  Keep it simple and focus on a few things you come to understand deeply.  Even Buffett, who is a top rated, very large, corporate issuer of grade-A interest-only Japanese paper, only uses the proceeds to fund Yen based investments in Japan (although several of those trading companies have significant business in USD as well).  

thanks Gfp. Yes, and Buffett is using long term un-callable debt, verus ibkr I could get margin call anytime..

[Spekulatius]

Carry trades have wiped out many traders. also, the yen is so cheap and they also will raise interest rates albeit slowly. If the interest differential between the USD and the yen falls, the yen should go up against the USD.

[Value_Added]

1 hour ago, Spekulatius said:

Carry trades have wiped out many traders. also, the yen is so cheap and they also will raise interest rates albeit slowly. If the interest differential between the USD and the yen falls, the yen should go up against the USD.

Curious is something like FXY would be a good bet here with unallocated cash sitting in USD…