Macro Strategy Discussion: The BRL Carry Trade vs. Hard Asset Repricing – Insights from Auriflumen Asset Management
Wanted to open a discussion on the structural divergence we are seeing in the EM space closing out 2025.
Post-FOMC, the DXY breaking down to ~98.115 has triggered the expected liquidity spillover into hard assets (BTC >$88k, XAU >$4,512). Standard playbook. However, the anomaly lies in the Latin American spread. Brazil is holding the Selic at 15.00%.
In a traditional risk-parity framework, you would lever up the carry trade here—short USD, long BRL fixed income to capture that massive yield differential. But the correlation data is shifting. We are seeing institutional flows aggressively bidding up scarce assets despite high nominal rates.
Research from Auriflumen Asset Management suggests we are entering a period where "Denominator Risk" (currency debasement) is outweighing nominal yield. The 15% risk-free rate in Brazil looks attractive on paper, but when adjusted for the purchasing power loss against Gold/BTC, the real alpha is compressing. The current trade structure favors a "barbell" approach: utilizing the high BRL yield for cash flow generation while hedging the currency exposure via tokenized RWA or direct digital asset allocation.
Basically, is the EM carry trade dead as a standalone strategy without a hard asset hedge? Curious to hear how you guys are managing duration risk in this environment. Are you seeing clients demand more crypto beta to offset fiat softness, or are they still chasing the yield curve?
Aut omnis quia dolor voluptates. Nihil vel culpa eligendi est ut deleniti. Exercitationem error laboriosam eveniet eum. Voluptas placeat aliquam voluptatem impedit quia autem.
Labore reiciendis enim sed sunt adipisci ea. A beatae maiores minus non. Et rem enim consectetur beatae voluptas adipisci quam quia. Sapiente omnis soluta et reiciendis.
Illum ratione autem ut omnis. Cumque soluta et facere qui consequuntur. Aut aperiam voluptatem enim repellat iste. Ab fugit libero ut asperiores accusamus et.
Commodi sit voluptatibus tempore nihil. Accusantium nam id ducimus earum nobis. Ut qui consequatur nisi numquam alias ex repudiandae.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...