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intermarket carry trade using a currency swap?

So you need to received fixed/pay floating in the steeper curve and pay fixing/receiving floating in the flatter curve. I can’t find any logic to this. Any help is much appreciated!!

If you're the first out the door, that's not called panicking

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1. You want to receive fixed and pay floating on the steeper curve because that makes you money. Let’s say you make 3% on this trade.

2. You want to pay fixed and receive float on the flat curve which actually loses you money. Let’s say you lose 1% on this trade.

- The net of #1 and #2 is still positive if you picked your countries well and the curve pays out right. The reason you would do this is to be duration neutral. Of course if you werent concerned about duration, you would just implement #1 as #2 is a loser. You can view #2 as the hedge.

125mph wrote:

1. You want to receive fixed and pay floating on the steeper curve because that makes you money. Let’s say you make 3% on this trade.

2. You want to pay fixed and receive float on the flat curve which actually loses you money. Let’s say you lose 1% on this trade.

- The net of #1 and #2 is still positive if you picked your countries well and the curve pays out right. The reason you would do this is to be duration neutral. Of course if you werent concerned about duration, you would just implement #1 as #2 is a loser. You can view #2 as the hedge.

Thanks 125mph for the explanation. Does this only work when the yield curve is expected to remain stable?

If you're the first out the door, that's not called panicking