G-10 carry trades survive the crunch

So why has the credit shock failed to dent the market’s carry-centric mentality? We believe it can partly be put down to time, and the Fed’s unexpectedly aggressive response to the market turbulence. After all, the impact of the shock on the real economy will take some time to feed through. And markets have assumed – rightly or wrongly – that the Fed will do whatever it takes to help financial markets find their footing.

But, more importantly, the credit market stress has done nothing to damage