This study examines the time-varying excess returns in an international interest rate arbitrage (IIRA) strategy, with a particular emphasis on these excess returns. Unlike traditional carry strategies that typically match funding and investment bonds' maturities or currencies, our novel IIRA strategy is a dynamically adjusted approach involves funding with a 1-year low-yield treasury bond while investing in 2- to 10-year high-yield bonds in foreign currencies. An analysis of Sharpe ratios, foreign exchange (FX), and yield excess return shows variations in the joint expectations hypothesis of the term structure (EHTS) and the uncovered interest rate parity (UIRP) lead to profits. However, the international strategies perform worse than the domestic carry strategies. Predictive factors, such as the Cochrane–Piazzesi, show limited effectiveness due to FX volatility. Therefore, future studies should examine more predictability factors.

中文翻译：

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国际利率套利：一种新策略研究


本研究考察了国际利率套利 （IIRA） 策略中的时变超额回报，特别强调这些超额回报。与通常匹配融资和投资债券到期日或货币的传统套利策略不同，我们新颖的 IIRA 策略是一种动态调整的方法，涉及以 1 年期低收益国债提供资金，同时投资于 2 至 10 年期高收益外币债券。对夏普比率、外汇 （FX） 和收益率超额回报的分析表明，期限结构 （EHTS） 和未覆盖利率平价 （UIRP） 的联合预期假设会带来利润。然而，国际策略的表现比国内套利策略差。由于外汇波动性，预测因素（如 Cochrane-Piazzesi）显示有效性有限。因此，未来的研究应该考察更多的可预测性因素。