Yields on the bank’s G10, emerging market and global carry trade baskets have fallen about 10% since May, quantitative strategists Antonin Delair, Meera Chandan and Kunj Padh wrote in a note to clients. The price moves have wiped out year-to-date returns and significantly reduced gains accumulated since the end of 2022.

“The spot component of the global carry basket suggests that 75 percent of carry trades have been removed,” the JPMorgan team wrote, reiterating that “the clock is ticking on G10 carry.”

The carry strategy – which involves borrowing money at low interest rates to finance purchases of higher-yielding assets elsewhere – has been shaky for months. Carry trades were hit hard last week as volatility in global markets rose on fears of rapid rate cuts by the U.S. Federal Reserve and after the Bank of Japan’s bigger-than-expected rate hike.

The recent sell-off was twice as fast as a typical carry drawdown. Strategists say there may be little chance of a recovery in August as “the central bank calendar is not full for this period and volatility has already subsided.”

However, the global carry trade strategy “does not offer an attractive risk-reward ratio,” they stressed. “The basket’s return has fallen sharply since the 2023 highs and does not provide sufficient compensation for holding the high emerging market betas during the US election and bearing the risk of further repricing of low-yielding assets if US yields fall.”