The MUFG Global Markets Podcast

Next week is a busy schedule for the financial markets with the FOMC, ECB and BoJ all meeting. Ahead of the BoJ meeting specifically, Derek Halpenny, Head of Research Global Markets EMEA & International Securities is joined by Sumino Kamei, Senior Analyst, Global Markets, to discuss possible outcomes of the BoJ meeting.
Sumino provides an update on market expectations from a Tokyo perspective following the BoJ comments this week that has seen YCC speculation subside and explains why MUFG Bank continues to think a change in policy could happen. Derek provides his thoughts on the FX impact and possible broader market implications.

Lee Hardman, Senior Currency Analyst, and Jack Greenslade from the Global Customer Marketing Group discuss the reasons behind the latest sell-off and whether it will continue. Inflation is also set to remain in focus for markets in the week ahead with the release of the latest CPI reports from New Zealand, Canada, the UK, the Eurozone and Japan. 

George Goncalves, MUFG Head of U.S. Macro Strategy, reflects on the price action and economic developments of the 1st half and provides us with thoughts on some of the risks that may lie ahead in the 2nd half. George believes that the markets caught a big break on the back of overly defensive posturing resulting in investors having to chase performance and close out short-positions and underweight level to benchmarks during the start of the year. Granted economic conditions in the U.S. were more favorable than initially feared, the overall global backdrop, especially on manufacturing side continues to weaken. Meanwhile we have central banks that have returned to hiking and the Fed has signaled that they are not done either after having skipped at the June FOMC. In our view, after a somewhat muted reaction to Fed tightening we believe the long and variable lags may actually hit harder now as we go through the 2nd half. George remains skeptical the regional bank crisis is fully resolved and that coupled with off-shore dollar liquidity draining could serve as a catalyst for risk-off.
 

Following the US jobs report from the US and ahead of the CPI data next week, Derek Halpenny, Head of Research Global Markets EMEA & International Securities discusses with Michael Owen, MUFG’s Head of Global Client desk for EMEA in London, the consequences for Fed policy, rates and the US dollar.
Derek also discusses the outperformance of the Japanese yen this week, highlighting developments that point to risks of a YCC change at the next BoJ policy meeting on 28th July.
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The JPY has weakened sharply during June falling below last year’s lows. Lee Hardman, Senior Currency Analyst, and Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London, discuss what has been driving recent JPY weakness & the risk of intervention.   

After two event-packed weeks including the FOMC, ECB and BoE meetings and Fed Chair Powell’s semi-annual testimony, Derek Halpenny, Head of Research, Global Markets EMEA and International Securities, discusses with Shan Husain, Vice President FI FX Sales, what the implications are for FX and rates going forward.
Derek also looks ahead to the ECB Annual Forum on Central Banking in Sintra, Portugal next week and the key incoming economic data that will help shape the direction of financial markets.
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Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Quant Analyst in London, discuss the main impact of the latest central bank updates from the BoJ, ECB, and Fed on FX markets. The GBP has hit fresh highs this week against other major currencies.
What are the main risks to the bullish trend in the week ahead?
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In this month’s podcast, MUFG Head of Prepayment Modeling and Strategy, Glenn Schultz, reviews the implications of how turnover has exceeded market expectations and the implications for valuation across the coupon stack. Notably, we make the case a continued tightening of the current coupon basis and our year-end forecast of 120 basis points against the back drop of prepayment, FDIC bank liquidation, and origination volumes.

George Goncalves, MUFG Head of U.S. Macro Strategy, returns to highlight the scenarios he is expecting at the upcoming June FOMC meeting and the potential market implications. George thinks the aim will be to deliver a hawkish skip, will the markets hear that or something entirely different is what we will be trying to assess. Post Fed we think markets should turn their attention from inflation fears and central bank action towards the growth outlook. We believe quarter-end/month-end has the potential for some early fireworks before we get into the start of summer.

The Nikkei Average remains well bid while USDJPY feels a bit more top-heavy. In contrast JPY rates and JPY basis remain little changed.
In today's episode, MUFG Chief Japan Strategist Takahiro Sekido discusses Japanese life insurance company fiscal year 2022 earnings, International Transactions in Securities data and the upcoming BoJ policy meeting. He also shares his views on spot Dollar/Yen, Yen rates, and Yen basis.
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Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Vice President for Japanese Customer Sales for EMEA in London, discuss the potential impact of the upcoming FOMC meeting on USD performance.
Will the Fed follow in the footsteps of hawkish policy surprises delivered by the BoC and RBA over the past week?
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With the debt ceiling resolution behind us, George Goncalves, MUFG Head of U.S. Macro Strategy, returns to recap what feels like a market that is in a holding pattern until the passage of the CPI print and the FOMC meeting. He also discusses the medium-term risks with a keen focus on liquidity dynamics. The Treasury will be replenishing its General Account (TGA), which sits on the Fed's liability side of the balance-sheet via raising cash from T-bill issuance. At a minimum, this will likely result in a crowding out effect and at a maximum level, drain market liquidity. Given some areas of the banking system remain fragile and in need of funding, it’s critical to watch how this plays out over the summer. With QT ongoing and the Fed aiming to keep rates higher for longer, this liquidity story can supercharge the Fed’s tightening efforts ahead.

The Nikkei Average continues its upward climb. USDJPY has kept pace, topping the 140-mark. On the other hand, JGB yields and JPY basis have remained little changed.
In today's episode, MUFG Chief Japan Strategist Takahiro Sekido reviews asset price developments during May and looks ahead to June based upon BoJ monetary policy and fiscal and monetary fund flows. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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Following the stronger than expected US jobs report, Derek Halpenny, Head of Research, Global Markets EMEA and International Securities discusses with Julie Ellert, Head of Frabelux FX Corporate Sales, what the implications are for the US dollar and the FOMC meeting later this month.
Derek also outlines what he calls “the elephant in the room” following the debt ceiling deal – that is the terrible long-term debt outlook for the US. This issue will have to be tackled in the coming years which point to weaker growth and a weaker US dollar.

Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Vice President of Japanese Customer Sales for EMEA in London, discuss the turning around of the USD and whether it is likely to continue in the week ahead of the US debt ceiling crescendo.
However, the biggest, hawkish repricing of central policy has been in the UK. How does this impact the pound?
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George Goncalves, MUFG Head of U.S. Macro Strategy, returns to give us an update on the current status of the debt ceiling negotiations. He explores scenarios of how this impasse may conclude and potential market implications. George also takes us through his latest Fed thinking, taking into account all of the recent Fed speakers. He also provides us with a mini-preview of what to expect at the June FOMC meeting. George looks further down the road on how the Fed may shift towards easing and what to do with QT and the supersized RRP. Lastly, if that was not enough to get one’s arms around, George provides a list of what else is on his risk radar.

The Nikkei Average and Dollar/Yen keep climbing higher. Meanwhile, Yen rate and Yen cross-currency basis remain little changed. Now that the G7 Summit in Hiroshima is over, speculation about whether Prime Minister Fumio Kishida will disband the Lower House and call for elections is growing.
In today's episode, MUFG Chief Japan Strategist Takahiro Sekido gives his view on triggers in the wake of the G7 Summit in Hiroshima as well as his analysis of the latest April JSDA data. He also shares his outlook for spot Dollar/Yen, Yen rate, and Yen basis.
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Optimism of a deal being agreed to lift the debt ceiling in the US has helped lift the dollar this week. Derek Halpenny, Head of Research, Global Markets EMEA and International Securities, explains to Shan Husain, Vice President, FI FX Sales, why he remains unconvinced over the sustainability of the move stronger for the dollar and expects the positive momentum to fade.
Derek looks ahead to next week with UK inflation also in focus which will be key for the outlook for the pound.
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Dollar/Yen is higher, Yen rates are little changed, and Yen cross-currency basis has started to widen slightly. Major Japanese banks have released their FY23 earnings results in mid-May, to be followed by major lifers. Bank of Japan Governor Kazuo Ueda will be watching financial system stability as he determines his next monetary policy steps.
In today's episode, MUFG Chief Japan Strategist Takahiro Sekido discusses recent political developments, cross border flows, and implications for financial markets. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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In today’s episode, MUFG Head of Prepayment Modeling and Strategy, Glenn Schultz, reviews April remittance data highlighting the ‘Kings of Carry’ and relative value around the convexity cross, and the outlook for the agency mortgage basis given the FDIC liquidations current U.S. budget negotiation. He also discusses the possible implications of the debt ceiling brinksmanship on both the GNMA and Conventional MBS sectors.
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Lee Hardman, Senior Currency Analyst, and Michael Owen, Head of Global Client Desk EMEA, discuss the USD’s recent performance and Bank of England’s policy update. After a better week for the USD, is the tide beginning to turn?  
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During Golden Week, the FOMC held its May meeting while the US regional bank sector remained riddled by credit concerns. Despite all that, the lower side of the USD/JPY was solid and the rise of Yen interest rates and widening of Yen basis were limited. If investment flows from Japanese investors pick up after Golden Week as we expect, USD/JPY, Yen interest rates, and Yen basis will become more volatile.
In today's episode, MUFG Chief Japan Strategist Takahiro Sekido reviews the JSDA data for March, as well as April fiscal and BoJ fund flows and implications. He also shares his views on spot USDJPY, Yen rates, and Yen basis.
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Lee Hardman, Senior Currency Analyst, and Jack Greenslade from the Global Customer Marketing Group, discuss the key takeaways for the FX market covering the latest policy updates from the Federal Reserve and European Central Bank.
The Bank of England is the next major central bank to update policy in the week ahead but will it alter the pound’s bullish momentum? 
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George Goncalves, MUFG Head of U.S. Macro Strategy, thinks that given the macro to markets setup, the Fed shouldn’t be hiking at this point, but they likely will, so long as the rates market is pricing in over a 75% chance of rate hike come the time of the May FOMC rate decision meeting conclusion. Thus, the Fed is on track to deliver another 25bp hike and take up the range for the Fed Funds target rate to 5-5.25%. That said, he also believes that this could ultimately be the last hike of what was one of the most aggressive Fed hiking cycles in recent history.
The continued slide lower in U.S. economic activity with ongoing improvements in inflation measures, coupled with renewed banking turmoil and a more pressing U.S. debt ceiling impasse ahead warrants a pause, but again the Fed will likely hike at the May meeting. Therefore, Chair Powell will try to convey a neutral message and not sound overly hawkish or dovish at this juncture. We expect the presser to be dominated by regional bank concerns, especially after witnessing another bank failure this year (and the third such bank failure happened days before the FOMC decision).
Overall, the Fed’s rate path from here is fraught with many challenges. For example, until financial conditions worsen (which we believe they will into the 2nd half of 2023) and/or if there were to be a cascading of bank related trouble in the near future, unless things are glaringly and perpetually bad, the Fed will try to look past the recent bank failures. Reason being is that they want to push back on the market pricing of rate cuts and hold the line – conveying that they are planning to hold rates “higher for longer” to ensure all these rate hikes are working at wrestling inflation closer to their 2% target. The tricky part will be that holding rates at these even higher rates levels will likely expose further weakness in the banking system and potentially the private credit sector as well.Net, we won’t know for sure if this is the last rate hike – that will hinge on their assessment that enough has been done. The markets still have to contend with NFP and CPI ahead (which depending on the messaging from the Fed and the outcome of this upcoming data batch, could re-introduce some rate hike pricing into June). However, in our view the outlook will likely worsen from here and uncertainty may go up a lot if the debt ceiling process is taken down to the wire. If so, the key thing to watch post FOMC will be how Fed speakers react to the data and debt ceiling developments. 
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