Citigroup Pushes Yen-Funded Carry Trades After 12% Gain in 2026
Collapsing volatility has driven a 12% gain in the yen-funded carry trade (Brazilian real, Colombian peso and Turkish lira) in 2026. Citigroup is recommending this strategy alongside Goldman Sachs to clients, potentially boosting its trading revenue.
1. Volatility Drop Spurs Healthy Carry Returns
The relative collapse in currency and bond volatility following a Middle East ceasefire has empowered yen-funded carry trades, driving a 12% gain in a basket of Brazilian real, Colombian peso and Turkish lira during the first quarter of 2026—the strongest start in three years.
2. Citigroup's Carry Trade Recommendations
To capitalize on this trend, Citigroup has been advising clients to borrow in Japanese yen and allocate into a diversified currency basket including Mexican peso, Brazilian real and Turkish lira, mirroring similar strategies by other major banks.
3. Potential Risks and Outlook
Despite strong early returns, a sudden pickup in volatility could reverse gains as seen in 2024; strategists warn that renewed geopolitical tensions or shifts in monetary policy could undermine carry trade performance.