J.P. Morgan: 75% of global Arbitrage trades have already closed positions. The future of G-10 Arbitrage trading is limited.

On August 8th, JPMorgan Chase stated that three-quarters of global arbitrage trades have closed positions, and the recent decline has wiped out this year’s gains. Quantitative strategists Antonin Delair, Meera Chandan, and Kunj Padh wrote in a letter to clients that the returns of the bank’s tracked G-10, emerging market, and global arbitrage trade baskets have declined by about 10% since May. The decline has erased year-to-date returns and significantly reduced accumulated profits since the end of 2022. The team wrote that 75% of arbitrage trades in the global arbitrage trade basket have closed positions. They reiterated that there isn’t much time left for G-10 arbitrage trades. These strategists believe that the chance of a rebound in August may be small, as the central bank’s schedule during this period is relatively light, and volatility has started to cool down.