Bond spreads have a profound influence in the forex market. This is in tandem with many of the correlations we see between currencies and other markets such as the stock markets and the commodity markets. In this article, we will show the correlation between forex and bond spreads. What are Bond Spreads? What are bond spreads? The bond spread is the difference in the yield of one bond and another bond. Specifically, it is used to describe the yield spread difference of the bond yields of two countries. In the forex market, the difference in the interest rate yields of two countries form the basis of the carry trade in forex. The carry trade is the practice of purchasing (i.e. taking a [...]
