Emerging Markets Strategy Weekly: Summer of Carry?

Research evidence excerpt

Emerging Markets Strategy Weekly: Summer of Carry?

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16 Jul 2026 13:08:48 ET │ 35 pages

Emerging Markets Strategy Weekly

Summer of Carry?

CITI'S TAKE

Luis E Costa, CFA AC

As we head into peak summertime, EMFX carry trades have made a popular +44-20-7986-9757

comeback, as risk has been re-deployed after the likely peak in oil prices. In luis.costa@citi.com

this analysis, we backtest EMFX carry trades from a seasonal perspective,

using different iterations of the carry trade. We find that while July offers a Rohit Garg AC

historically favorable risk-return profile, August consistently proves to be a +65-6657-3471

volatile and unfavorable month across our backtests. It exhibits high rohit.garg@citi.com

volatility and negative mean returns, which we attribute to crowded

positioning creating vulnerability to unexpected headlines. Conversely, Donato Guarino AC

January is the strongest period historically, consistently delivering high +1-212-723-3298

returns with low volatility as new risk is deployed at the start of the year. We donato.guarino@citi.com

also find that vol-weighting strategies can mitigate some August downside,

but caution is still warranted. Bhumika Gupta AC

+44-20-7986-5933

Asia — We detail the trade adjustments implemented over the past week and bhumika1.gupta@citi.com

outline the rationale behind them. AC Alexander Rozhetskin

CEEMEA — As Senegal took important steps towards engaging the IMF, we look at +44-20-7508-4787

the recovery values on the Eurobonds. alexander.rozhetskin@citi.com

Ivan Riveros,CFA ACLatAm — The Superintendency of Pensions (SP) is currently conducting public

consultations on the new pension fund regime, although limited public information +1-212-723-0865