Global Markets Daily Carrying On — Carry Trades Resilient But Continue to Prefer Equity to Credit

Economics Research 11 August 2026 | 1:08PM BST

Global Markets Daily: Carrying On — Carry Trades Resilient But Continue to Prefer Equity to Credit

n Carry trades have proven resilient despite a more volatile macro backdrop, and Christian Mueller-Glissmann, CFA swings in risk appetite. The impact of Middle East tensions on energy prices, | christian.mueller- higher long-dated bond yields and FX interventions around the Yen have created Goldman Sachs International

limited spillovers to carry strategies - the growth/inflation mix has continued to Alessandro Giglio | be supportive and central banks less hawkish than feared. Goldman Sachs International n The broad carry opportunity set is still constrained. Our Carry Opportunity Andrea Ferrario | Indicator is back near multi-year lows with compressed carry risk premia already Goldman Sachs International reflecting a ‘carry-friendly’ regime. FX carry has delivered the strongest Elena Porfidia risk-adjusted returns, while other carry strategies have been more mixed. Credit | total and excess returns have been relatively weak on a risk-adjusted basis. Goldman Sachs International

n We continue to prefer equity to credit in our asset allocation in 2H. Despite high all-in yields, credit spreads and term premia remain low, creating less incentive to move up the risk curve. Late cycle restructuring and releveraging tend to support equity relative to credit. Also, while AI capex is supporting positive earnings growth and revisions boosting equities, additional debt issuance puts upward pressure on credit spreads.

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Goldman Sachs Global Markets Daily

Carrying On — Carry Trades Resilient But Continue to Prefer Equity to Credit

Risk appetite has rebounded following July’s setback - our Risk Appetite Indicator (RAI) is back above 1. Large rotations under the surface linked to AI capex and the Technology sector temporarily weighed on growth pricing across assets (RAI PC1) but it has broadly stabilised, helped by a strong Q2 earnings seasons in the US, Europe and Asia, falling oil prices and also supportive PMIs, at least in DM. After the renewed Middle East tensions there was also a drag on risk appetite from more hawkish monetary policy pricing (RAI PC2) and upward pressure on longer-dated bond yields, with US 30-year yields reaching new post-GFC highs at 5.27% - however, falling oil prices and weaker-than-expected payrolls created some ‘Goldilocks’ relief with Fed pricing shifting more dovish. And while USD/JPY and EUR/JPY interventions have led to a stronger Yen, which has been more consistent with a ‘risk-off’ backdrop, the impact on risk appetite has been limited so far.

Exhibit 1: Markets shifted back to ‘Goldilocks’ after growth concerns and hawkish policy & & & & &

Source: Datastream, Haver Analytics, Goldman Sachs Global Investment Research

While similar macro shocks historically created negative spillovers for carry trades, they have been more resilient this time. Our Carry Opportunity Indicator (COI), which includes carry risk premia for EM/sovereign/corporate credit, FX, equity volatility and yield curve, picked up modestly after being near its lowest levels since the GFC (Exhibit 2). However, in the recent relief rally, the COI declined again and is nearing its multi-year lows. Carry regimes are closely linked to the business cycle – a high growth score indicating a stable late cycle position (see our dynamic asset allocation framework) tends to anchor carry risk premia.