Bloomberg Surveillance · Thursday, September 17, 2026
Ed Yardeni highlights the unwind of the yen carry trade as a significant factor contributing to the global rise in bond yields. He explains that hedge funds borrowing cheaply in Japan and investing worldwide are now facing increased financing costs and risks, potentially leading to further instability in the global bond market.
“The U.S. Officials keep putting pressure on the Japanese to increase their interest rates at a faster rate, which makes sense from a macroeconomic standpoint, but unfortunately, we may find out that this leads to more unwinding of the carry trade, which means hedge funds that borrowed in Japan at very low interest rates, when the yen was getting weaker, now will flip around and say, you know, that's that financing is just too expensive now, too risky.”
“Hedge funds, as I mentioned before, they went and borrowed at close to zero in Japan, got the proceeds in yen, converted them to other currencies, and bought government bonds and other assets around the world.”
“And I think that's probably one of the best explanations for why this has been a global route, because the hedge funds took the money and invested it all over the world in areas where they thought they'd get a good carry trade opportunity.”