Wednesday, October 31, 2012

Eurozone investors jump on the carry trade

Another recent survey seems to indicate that the Eurozone institutional investors are taking on more periphery risk. With the ECB backstop in place (see discussion), investors in the area have shifted to being long periphery debt vs. the core. Given this increased appetite for risk, should the expected ECB aid to Spain fail to materialize (see discussion), the selloff could be quite violent.
JPMorgan: - Investors have shifted their peripheral positioning to long in recent weeks which could become a risk for intra-EMU spread tightener trades.
Source: JPMorgan
For now however the carry trade in the Eurozone is on.
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