Carry trade

An attempt to profit from the differing yields of two assets. Imagine a trader borrowing Japanese yen at a near-zero interest rate, for instance, then investing the proceeds in American Treasury bonds that yield 5%. They could pocket the profits—unless the yen strengthened before the debt came due, making it more expensive to pay back. Read our explainer on why borrowing cheaply to buy high-yielding assets is popular, but risky.