You too can now relax

People have stopped worrying about covered interest parity.

This worry has expired along with the cross-currency basis. Here’s Matt Klein at Alphaville explaining that for much of 2016, it was much cheaper to borrow dollars in the U.S. and hedge them into yen than it was to borrow yen in Japan, creating an obvious arbitrage that nonetheless didn’t go away. But then it did, due to declining dollar strength or the full phasing-in of money-market-fund reform or changes in Federal Reserve balance-sheet policy. I look forward to other recurring Money Stuff worries being so fully and satisfactorily resolved.

That is from the “no one else could do what he does” Matt Levine at Bloomberg.  And Matt points out that Stephen Curry is reading Ray Dalio’s Principles.


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