Ahead of a Fed Move, A Cash Cow Runs Dry

摘要

Like a tightrope walker on a suddenly windy day, the bond market is trying to get back to solid ground after a heady period of high profits made from cheap money and a tactic known as the carry trade. Hedge funds, bond dealers, and commercial banks borrow at, or near, the 1% overnight rate set by the Federal Reserve and then invest the money in multiyear notes and bonds that yield much more. Over the past 18 months a carry trade into 10-year U.S. Treasuries has typically earned 3% on the investment over a year-a huge payoff on a multimillion-dollar deal. The profits were even juicier for those venturing into higher-yielding mortgage-backed securities, corporate bonds, and emerging-market debt.