The "widowmaker" trade specifically refers to shorting Japanese Government Bonds (JGBs), a notoriously risky position that has led to significant losses for many traders over decades. This trade earned its ominous nickname due to its history of causing substantial financial casualties among global macro hedge funds.

Historical Context

Since the 1990s, traders have repeatedly attempted to profit from betting against Japanese government debt, expecting interest rates to rise from their historically low levels. Despite Japan's high debt-to-GDP ratio (exceeding 260%), the persistence of low interest rates has consistently proved these short positions wrong.