Kursiv Research suggested that the current inflow of non-resident investment into government securities of Kazakhstan issuers is the result of carry traders' activity, and examined possible scenarios. This was reported by Qazaqyia.kz citing Kursiv Media.
Over the past 12 months – from September 2025 to August 2026 – the volume of non-resident funds concentrated in Kazakh government securities increased 2.3 times in dollar terms, from $2.4 billion to $5.6 billion (Kursiv Research calculations based on the average monthly USD/KZT exchange rate). The share of non-residents among holders of government bonds rose from 4.8% to 7.9%.
In both absolute and relative terms, the volume is not very large, considering that the gross gold and foreign exchange reserves of the National Bank of Kazakhstan over the same period increased by $12.8 billion and reached $70.2 billion, while the volume of foreign currency assets of the National Fund of Kazakhstan grew by $4.5 billion and at the end of the period stood at about $67.2 billion. Even on the scale of monthly trading on KASE last August – $9.4 billion including the additional session – this is not an extreme amount.
More interesting is how high the potential is for continued rapid growth in non-residents' interest in Kazakh government securities, and in other assets including quasi-state sector liabilities. To answer this, one must determine what attracted foreigners to Kazakh government debt.
Despite all the efforts of the government and the National Bank to improve conditions for foreign investors, there were few institutional factors during this period. However, these 12 months included the placement of Eurobonds and yuan bonds by the Ministry of Finance of Kazakhstan (the total volume of issues on placement dates was equivalent to just over $5 billion), as well as two critically important trends.
The first is the entry of the difference between tenge and dollar rates into a record-high range of between 12.5 and 14.5 percentage points (pp). Following accelerating inflation, the National Bank of Kazakhstan in October 2025 began another cycle of raising the base rate, which translated into a rise in the money market rate (TONIA), while the similar dollar rate (SOFR) was declining. In the summer of 2026, the National Bank began a rate-cutting cycle, after which TONIA also began to decline, while capital market yields, as noted by the Association of Financiers of Kazakhstan, declined more slowly.
The second trend is the strengthening of the tenge against the dollar: if in September 2025 the weighted average USD/KZT rate was 540.74 tenge, then by August 2026, steadily strengthening, it climbed to 464.55 tenge (–14%).
These two conditions are enough to attract carry traders' interest in tenge assets.
Carry trade is a speculative strategy in which an economic agent borrows in a currency with low rates of return (funding currency) to purchase assets in a currency with high rates (target currency).
The key point is the stability of the exchange rate of currencies amid a significant interest rate differential. When the target currency begins to weaken, investors tend to exit assets denominated in it, and speculative investors flee it at full speed. In doing so, they create additional simultaneous pressure on the exchange rate and worsen the situation in the national economy.
When the inflow of foreign capital abruptly turns into an outflow, the "sudden stop" effect occurs (in professional literature this phenomenon is often reproduced in the original language – sudden stop). This is followed not only by depreciation of the national currency, but also by defaults of some players with negative net foreign currency positions, credit contraction, and sometimes recession. For a small open economy, this is fraught with a full-scale economic crisis, which may well end with the resignation of the government.
The behavior of speculative players catching rate arbitrage has been studied by economists for almost half a century, and the key features of their behavior and the effects it transmits to financial markets are well studied. In the classic work of Nobel laureate Eugene Fama (1984), the general patterns of investors' work on the rate differential across instruments in different currencies are described. Fama explained the returns that carry traders capture as a premium for currency risk.
Almost 30 years later, Hanno Lustig, Nikolai Roussanov and Adrien Verdelhan (2011) studied currency baskets and established that high-yield assets have positive sensitivity to global liquidity shocks and fall synchronously during global crises, while low-yield currencies (the Swiss franc, the Japanese yen) serve as safe havens.
Over the same period, there was a series of no fewer than two dozen crises in national economies caused by an inflow of speculative capital amid rate differentials, followed by its washing out. The most recent case studied is the volatility in August 2024 in Japan, which affected on- and off-balance-sheet assets worth $250 billion.
The most striking cases in developing economies are the crises in Turkey in 2021 and in Egypt in 2022.
Turkey experienced a sudden stop against the backdrop of inconsistent monetary policy amid a high level of foreign currency liabilities in the financial sector: against the backdrop of the lira's devaluation at the end of 2020, the new head of the Central Bank of Turkey, Naci Agbal, sharply raised the policy rate from 10.2% to 19.00%, after which more than $5 billion of speculative capital flowed into Turkish government bonds, and the lira strengthened by 15%. Agbal's dismissal in March 2021 and the return to soft monetary policy caused a sudden stop and a 15% fall in the lira in a single trading day.
Since 2016, Egypt maintained a high policy rate to stabilize the exchange rate of the national currency (the Egyptian pound), and by 2019 it had succeeded. However, the Central Bank of Egypt was in no hurry to radically ease monetary policy (the minimum value maintained from November 2020 to February 2022 was 8.25%), so by the beginning of 2020, investors' attention was drawn to the fact that, given the pound's 13% strengthening during 2021, the real rate of return in Egypt turned out to be one of the highest in the world.
Investments in Egyptian government securities at the end of 2020 were called the best offer for carry.