Treasury Rout Threatens Popular EM Carry Trade as Citi Pulls Back
Mint 1 hr ago·24 Sept 2026, 7:22 pm
US Treasury yields have surged to levels not seen in decades, sparking a sharp sell‑off in the Treasury market. Citi responded by scaling back its exposure to the popular “carry trade,” where investors borrow cheap dollars to buy higher‑yielding emerging‑market assets.
The move matters because rising yields raise the cost of funding those trades, squeezing the spread that made them attractive. As the spread narrows, emerging‑market equities and bonds could see weaker demand, potentially prompting outflows from EM‑focused funds.
Investors should keep an eye on the direction of Treasury yields, any further Federal Reserve policy changes, and the evolution of EM currency and bond spreads, which will signal whether the carry‑trade pressure eases or intensifies.
Excerpt from Mint
The surge that sent US Treasury yields to the highest in decades is threatening carry trades that had become the go-to strategy for emerging-market investors this year. (Bloomberg) -- The surge that sent US Treasury yields to the highest in decades is threatening carry trades that had become the go-to strategy for…Read the original at Mint
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