💹King Of Carry Losses Crown After Spike In Risk Premium: Cable FX Macro

• The best performing carry trade of 2024 gained popularity as returns were not closely matched by peers. By the end of the first quarter, shorting yen vs the Mexican peso had a YTD return of 17 points, no other major currency recorded gains in the double digits

• Even Bloomberg showed the strategy outperforming the equity market benchmark despite stocks making fresh record highs. If we look back to the start of the global tightening cycle, MXN/JPY outperformed SPX by almost 50bps at the end of March

• As of today, the pound and the dollar led the currency carry trade in the G10. The sharp correction in the peso due to an increase in its risk premium might have marked the end of a cycle, however, alternatives will likely replace the peso as carry vehicle