The carry trade is dead, long live the carry trade

5 May 2005

The right ingredients seem to be in place. The European economy is weak, and interest rates are at record lows. The trade is mostly taking place within the eurozone, but there are signs it is spreading abroad. If this continues, the euro will fall.

This content is for Subscribers only

Context News

Yields on eurozone government bonds fell to record lows this week when the 10year bund yield dropped to 3.36%.

Official Eurozone interest rates currently stand at 2%, compared to 3% in the US and 4.75% in the UK. JeanClaude Trichet, president of the European Central Bank, has rebuffed calls for lower interest rates despite the weakening European economy.

Low interest rates have fuelled a wave of private equity activity in Europe. The mooted E12bn private equity buyout of Spanish telecoms firm Auna would be the world's second largest leveraged buyout ever.

Over the past 12months, the total value of European private equity deals has reached $85bn, according to Dealogic, against $54bn in the UK and $133bn in the US.

Email a friend

Please complete the form below.

Required fields *