Citi Shuts Emerging-Market Carry Trade Book as US Treasury Yields Spike

The closure of a major bank's EM carry book is a signal about positioning, not just volatility. When a desk unwinds longs in high-yielders like the rand, peso and lira against funding currencies, it suggests crowded trades are being cleared rather than a change in the underlying rate differentials. The drivers cited — a strong PMI, a weak Treasury auction and geopolitical headlines — point to a rates-and-risk channel, not EM-specific deterioration. Whether other desks follow with similar de-risking, and whether volatility stays elevated, is the open question for EM FX.