Super backwardation trips up commodity carry trade
Wrong type of curve derails quants’ commodity carry trade for worst spell in decades
Commodities markets are roaring. But for one quant strategy, that’s not great news.
Historic spikes in prices sparked by pandemic recovery and war in Ukraine have flipped commodity futures curves back to front and inside out. And for so-called curve carry strategies, that’s about as bad as it could get: a trade that delivered positive returns in all but one of the past 19 years is suddenly bleeding cash.
So, quants are now deliberating how best to respond to what could be a new era of ‘super
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