The MUFG Global Markets Podcast

The year ahead in Agency MBS: The MUFG Global Markets Podcast

In this episode, MUFG Head of Agency Mortgage Strategy and Prepayment Modeling, Glenn Schultz, discusses MUFG’s 2021 forward outlook in prepayment speeds, mortgage origination volumes, primary and secondary spreads, and investor appetite.
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What do changes in December fiscal flows, BoJ monetary operations, and base money mean for USDJPY, cross-currency basis, and JPY rate?: The MUFG Global Markets Podcast

Now that the U.S. Presidential and Congressional election results have been confirmed, the U.S. yield curve is likely to steepen over the near-term. Japanese investors will have to adjust their developed economy bond portfolios, not only with U.S. Treasuries, but also European bonds and JGBs. Developed economy stock markets have reacted favorably to the confirmation of results of the U.S. elections. The BoJ’s ETF purchases are clearly helping to drive the Nikkei Average upward. Meanwhile, the COVID-19 pandemic is growing more serious and on January 7, Prime Minister Yoshihide Suga declared a state of emergency for the Tokyo area. The spotlight will be on the government and BoJ’s pandemic support measures, and investor behavior could change. Understanding fiscal and monetary policy will be key to prognosticating the next trend for JPY cross assets.
In today’s episode, MUFG Chief Japan Strategist, Takahiro Sekido, discusses developments with fiscal financing, the BoJ’s monetary operations, and the monetary base in December and what they could mean for the BoJ's monetary policy review in March. He also shares his outlooks for USDJPY, cross-currency basis, and JPY rate.
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Some relief at last for the USD: The Global Markets FX Week Ahead Podcast

This week, Lee Hardman, senior currency analyst, gives his expectations for the future of U.S. fiscal stimulus and monetary policy now the surprise results from the Georgia run offs mean the Democrats have narrowly taken back control of the Senate.
Meanwhile in the UK, the economic forecast is far from rosy; a sharp acceleration of COVID-19 cases has led to nationwide lockdowns with possible tighter restrictions on the horizon. Is it time for the Bank of England to introduce negative interest rates? Lee Hardman gives his view.
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COVID-19 skews JGBs and JPY basis through early 2021 as JPY arbitrage flows pick up: The MUFG Global Markets Podcast

USDJPY fell gradually on limited downside room for JPY rates. JPY basis has started to slowly tighten as overseas traders make more JPY cross-currency flows. JPY rate swap spreads have also turned positive and started to widen. The government has started to consider declaring a state of emergency for Tokyo and three neighboring prefectures as the third wave of the pandemic worsens. On January 4, Japan stocks fell as the country’s economy makes only halting progress toward normalization in a post-COVID-19 world.
In today’s episode, MUFG Chief Japan Strategist, Takahiro Sekido, reviews JPY rates and basis at the end of 2020 and the start of 2021. He also discusses the skewed JPY basis market and upward pressure on the front end of the JPY yield curve at the end of 2020. He offers his outlook for JPY rates, basis, and USDJPY.
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All eyes on the battle for the Senate: The Global Markets FX Week Ahead Podcast

2021 is upon us, and kicking off the year is the Senate runoff elections. Following a tumultuous U.S. Presidential election, this is the final hurdle for Joe Biden and the Democrats to seize control over Congress.
This week, Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, looks at the polls and the potential impacts on USD and the markets. Derek also gives his view on key issues for the week, including vaccine efficacy rates as new strains of COVID-19 lead to tighter restrictions in Europe and beyond.
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Record JGB issuance announced just days after the BoJ announces a surprise review of monetary policy suggests Modern Monetary Theory in practice: The MUFG Global Markets Podcast

On December 18, Bank of Japan Governor Haruhiko Kuroda announced that the central bank had agreed to extend pandemic response measures and will assess monetary policy, with results to be announced at the March Policy Board meeting. On December 21, Prime Minister Yoshihide Suga’s expanded JPY106 trillion budget was passed, and an increase in JGB issuances was approved. At this time, JPY rates basis and USDJPY are steady, ahead of the end of the 2020 calendar year.
In today’s episode, MUFG Chief Japan Strategist, Takahiro Sekido, shares his thoughts on the BoJ’s monetary policy assessment, the Suga Administration’s FY21 JGB issuance plans, the BoJ’s USD fund buying from the MoF, and cross-border flows. He also goes through his outlook for Yen rate, cross-currency basis, and Dollar / Yen.
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New COVID-19 strain brings market uncertainty: The Global Markets FX Week Ahead Podcast

‘Uncertainty’ is the key theme for this week. After a huge run up in risk across global markets, a new variant of COVID-19 is bringing a number of questions, such as will the tier 4 restrictions currently placed on London and the South East of England spread to the rest of the UK? How will Europe shield itself? Are there implications for the vaccine?
Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, gives us his insights into how this news has been priced into the market and his view for the week ahead.
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Is Powell reading from our playbook?: The MUFG Global Markets Podcast

Chair Powell put it quite succinctly in the Q&A portion of the FOMC’s Press Conference to the December 15-16 Meeting, “The combination of the Cares Act and the strong monetary policy stimulus propelled a recovery that was, frankly, far stronger than we expected back in April, May, and June.” In this much anticipated FOMC Meeting, Chair Powell covered so much ground, and in this podcast, MUFG U.S. Rates Strategist, John Herrmann, attempts to bring it all to life. 
First, over the very uncertain path of the Fed’s monthly Treasury security purchases, the Committee concluded that neither the pace (at $80.0 billion per month) nor the composition (proportionately across the yield curve) would change – matching our forecasts. Second, of the important forward guidance over the “horizon” of asset purchases, the Committee introduced “qualitative outcome-based forward guidance” that matched our predictions. Third, Chair Powell acknowledged that the coming three-four-five-months would be quite challenging – with the pandemic raging – but the growth rebound that follows would be a strong one, he believes.
Chair Powell strengthened the Committee’s projection for GDP growth over years 2021 and 2022, while lowering the projection for the unemployment rate. The Committee’s projections are not nearly as optimistic as our models forecasts, but Chair Powell is closing the gap, and catching up quickly. We commend the Chair and his Committee upon their excellent and thorough hard work in this most difficult of a year!

Fiscal spending drives record JGB issuance while both foreign and Japanese investors engage in massive cross-border flows: The MUFG Global Markets Podcas

The Suga Administration unveiled additional economic stimulus is huge, including JPY73.6 trillion in total projects and JPY40 trillion in fiscal spending. Interestingly, the JGB market has taken all that issuance in stride, even last week’s 20Yr auction. USDJPY has stayed in a narrow range and JPY basis is tight. Tokyo market trading at year’s end has been quiet, but there is a slew of market events, including the release of the third supplementary budget on December 15, the BoJ’s meeting on December 17-18, and the Ministry of Finance’s release of FY21 JGB issuance plans on December 21, for investors to navigate before the calendar year’s end.
In today’s episode, MUFG Chief Japan Strategist, Takahiro Sekido, discusses JGB trends in light of Prime Minister Suga’s additional economic stimulus measures and the third supplementary budget, as well as takeaways from the December Tankan survey. He also reviews recent cross-border flows and shares his outlook for Dollar / Yen, cross-currency basis, and Yen rate.

Will an ‘extra mile’ be enough? The Global Markets FX Week Ahead Podcast

The market is getting increasingly pessimistic over no-deal Brexit fears and what that could mean for the UK economy. Reports this morning are suggesting positive developments over the weekend, however, with vows to “go the extra mile” to get a deal reached.
Will this be enough to stave off elevated risk for GBP? Lee Hardman, currency analyst, looks at outlook for the pound amid continued Brexit chaos and his forecast for the upcoming Fed meeting this week.
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December FOMC meeting preview – Upgraded forecasts and upgraded quantitative easing?: The MUFG Global Markets Podcast

Over the past 8 months, it has been ironic to watch Chair Powell strengthen his economic growth and employment tracking projections, while he doubles down upon his view over the downside risks to the outlook and of the need to enact greater fiscal and monetary policy measures over the near-term. The latest news on the roll-out and effectiveness of COVID-19 vaccines suggests upside risks to the dour outlook over the medium-term.
In this episode, MUFG U.S. Rates Strategist, John Herrmann, previews the December FOMC meeting. John expects the FOMC to strengthen its GDP growth estimates and to lower its unemployment projections. He also thinks there is a decent chance that Chair Powell convinces the Committee to extend the duration of its Treasury security purchases and/or increase its monthly pace of Treasury purchases. These actions would support the economy in the face of current COVID-19 strains and also serve to restrain the extent of the sell-off in the back-end of the yield curve as the economy moves into many consecutive quarters of strong economic growth starting in Q2 2021.

Suga’s fiscal stimulus and December MoF fiscal flow projections hint at fiscal year 2021 JGB issuance: The MUFG Global Markets Podcast

The autumn Diet session ended on December 5. A risk of increased JGB issuances is lurking amidst the government ruling coalition’s announcement of a 15-month budget in mid-December and the Ministry of Finance’s release of its FY21 JGB issuance plans later in the month. Ahead of this, spot Dollar / Yen and Dollar / Yen cross-currency basis have been fairly flat and the Nikkei Average has stabilized around 26,000. The coronavirus crisis roiled markets in 2020, but markets in Tokyo are closing the year calmly.
In today’s episode, MUFG Chief Japan Strategist, Takahiro Sekido, previews economic stimulus, reviews the Bank of Japan’s monetary operations in November, discusses fiscal fund supply and demand in December, and examines recent investor cross-border flows. He also offers his outlook for Yen rate, Dollar / Yen cross-currency basis, and spot Dollar / Yen.

Brexit negotiations reach end game: The Global Markets FX Week Ahead Podcast

With ongoing speculation around a no-deal Brexit, the markets continue to bounce as sterling’s volatility continues. With the ECB meeting on Thursday, the expectations of an extension to the quantitative easing programme and no rate cuts will strengthen.
MUFG’s Research Desk highlights a short US dollar and Swiss Franc, outperforming other G10 currencies, as well as a short Aussie dollar against the US buck (please note Derek meant to say “long Aussie dollar” at 10.22).
Derek Halpenny, Head of Research Global Markets EMEA and International Securities, discusses how the next 48 hours will be crucial in determining the outcome for the markets and Britain’s future as a whole.
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Are monthly payroll gains about to enter a “soft patch” and what factors may cause payroll growth to surge over most of 2021?: The MUFG Global Markets Podcast

As we get closer to the start of the next calendar year, we are tightening up our models forecasts, while assessing the recovery, thus far, over the year 2020. For the November employment report, John Herrmann outlines his models forecasts for another sharp decline in the U3 unemployment rate and for a solid gain in private sector payrolls. However, John’s models glean adverse risks for employment growth over the coming few months thereafter. By early spring, however, John’s models turn strongly constructive, and the 3rd Quarter may achieve a growth rate in real GDP in excess of +8.00% q/q SAAR.
In this episode, MUFG’s U.S. Rates Strategist, John Herrmann, shares our clients’ concerns for the very near-term, over the medium-term, and longer-term and also how his forecasts for economic and employment growth significantly outpace both the consensus estimates and the official projections of the FOMC. Is another “taper tantrum” in the offing over the second half of the year 2021? 

Lessons from the 2020 COVID-19 Pandemic and the 2021 JPY Cross-Asset Outlook: The MUFG Global Markets Podcast

2020 was altered in previously unimaginable ways by the COVID-19 pandemic. In March, global financial markets became extremely volatile in reaction to the huge disruption in the real economy. Across the globe, governments and central banks responded with coordinated policy measures that boosted both share and bond prices, as well as basis arbitrage trading of key currencies, which kept FX spot rates in tight ranges. The Bank of Japan responded to the crisis by aggressively supplying funds to the market and buying corporate bonds and ETFs. The USD supply operations helped to stabilize USD funding for Japanese investors, while the corporate bond and CP buying supported the credit market. These moves helped to quell risk contagion for global financial markets, and the Tokyo market is fairly calm as 2020 draws to a close. Compared to previous crises, like the late 1990s and 2008, JPY cross-asset pricing was very different this time.
In today’s episode, MUFG's Chief Japan Strategist, Takahiro Sekido, looks back on 2020 and shares his outlook for 2021. He also discusses the lessons learned from the COVID-19 crisis and his outlook for Dollar/Yen, Dollar/Yen basis, and Yen rate. 

USD slumps despite market optimism: The Global Markets FX Week Ahead Podcast

In this week's podcast, Lee Hardman, currency analyst, discusses market optimism following the continuing rally from COVID-19 vaccine developments, Biden's election win, possible advancements in Brexit trade talks and China's strengthening economy in year end.
Lee explains how this rosy outlook is benefitting a range of global currencies – all except USD, that is. 
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What does cross-border flow data from September tell us about COVID-19 risk aversion and changes to the microstructure of the Tokyo market?: The MUFG Global Markets Podcast

COVID-19 patient numbers are on the rise, and the third wave of the COVID-19 pandemic has started to put limits on economic activity. The positive surprise of coronavirus vaccines showing success lasted only a few days, and fears about the growing pandemic have offset the positive news. Looking ahead, the Northern Hemisphere is heading into winter and concerns about other, non-coronavirus illnesses will likely mount. Global investors could focus more on risk aversion. Amidst a dearth of risk takers in the global financial markets, we think that the U.S. current deficit and low U.S. rates will likely support a weaker Dollar.
In this episode, MUFG’s Chief Japan Strategist, Takahiro Sekido, dissects trends in cross-border flows evident in recent data, as well as the Tokyo market’s microstructure amongst Japanese, overseas investors, and the BoJ. He also shares his outlook for Dollar/Yen, Yen swap rates, and Yen basis.
 

Recycling from USD to global currencies: The Global Markets FX Week Ahead Podcast

This week sees USD on weaker footing, and Derek Halpenny, Head of Research for Global Markets EMEA, explains why he expects 2021 to see further dollar depreciation.
Derek also looks at sentiment shifts which means Emerging Markets have seen inflows of USD 30bn in the three week period since the election; can this positive momentum from recent COVID-19 vaccine news be sustained?
Listen for analysis on this and the key market moving events for the week ahead.
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Might an unthinkable level of COVID-19 infections catalyze further fiscal and monetary stimulus?: The MUFG Global Markets Podcast

John Herrmann reviews three risk factors of interest: (1) a rapid deterioration in statistical momentum over the 4th Quarter in consumer and business spending and in total business inventories, (2) strong mobility indicators and surging COVID-19 new infection cases and (3) a fundamentally divided Senate chamber that may be united – if only for a brief moment in the 1st Quarter – to deliver a relatively forceful stimulus package (of near $1.500 trillion, or greater) to thwart risks of: surging Wave 2 COVID-19 new cases (towards 250,000 to 300,000 per day), more stringent lock-down measures, and another economic contraction. 
In this episode, MUFG’s U.S. Rates Strategist, John Herrmann, finds that the complexion of risk factors remains supportive of his models forecast for real GDP growth over the 4th Quarter, of near +6.00% q/q annualized, or near -2.10% on a 4q/4q year-over-year rate. However, these very same factors point to a potentially worrisome outcome for 1st Quarter’s real GDP growth rate, of weaker than +1.00% q/q annualized – but with some risk of an economic contraction. Again, it is ironic that the U.S. Congress can be united only by risk of a near unthinkable rate of community spread of COVID-19 (and its implications for risk of an economic contraction)! As this drama plays out, waiting in the wings, the members of the FOMC begin their review of the policy toolkit to decide how best to support, prolong, and enhance U.S. economic recovery.
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Upcoming changes to BoJ yield curve control, cross-border flows, and Japan’s GDP recovery: The MUFG Global Markets Podcast

Japanese 1H corporate earnings releases have been mixed because of the COVID-19 pandemic, while investment flows among both Japanese companies and investors have been shifting in the wake of the U.S. election. Prime Minister Suga’s administration has noted the need for further economic stimulus and proposed a third supplementary budget to be combined with the FY21 budget and to span 15 months. The Jul-Sep GDP report showed a strong rebound in growth, but the forward-looking signals were decidedly mixed.
In this episode, MUFG’s Chief Japan Strategist, Takahiro Sekido, dissects the Jul-Sep GDP report and discusses its implications. He also reviews recent cross-border investment flows and shares his outlook for Dollar / Yen, Yen rate, and Dollar / Yen cross-currency basis.
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Taking stock of the U.S. economy amidst accelerating community spread of COVID-19, and did you miss your entry point for the yield curve steepener?: The MUFG Global Markets Podcast

With the 4th quarter likely beginning on such a strong trajectory, in terms of income growth and personal and business spending growth, there is a risk that real GDP only declined near -1.90% YoY in all of 2020 – significantly better than the consensus estimate of -3.30% and the Federal Reserve’s projection of -3.70%! Over the course of 2021, John Herrmann forecasts that the level of real GDP will be fully recovered by Autumn 2021, and the U3 unemployment rate fully recovered by Q1-2022. John raises the question: “For how much longer can the FOMC maintain its monthly asset purchase program of $120.0 billion per month? For how much longer will the FOMC be able to convince market participants that front-end interest rates will be anchored at zero lower bound?” While John has concerns over a severe season of community spread of COVID-19 over the coming few months, the “safe place to hide” may be in the 2s-30s yield curve steepener– especially should there be any pull-back over the coming month or two.
In this week’s podcast, MUFG U.S. Rates Strategist, John Herrmann, takes us through the October monthly employment report and all of the constructive signals he sees. As a standout indicator, his “proxy” for personal income growth of private-sector production and non-supervisory workers surged +1.36% month-on-month. That gain in income points to risk of another remarkably strong retail sales spending report next week. He also explores the implications of those forecasts on his investment thesis, the 2s-30s yield curve steepener.
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GDP forecast and the impact on delinquency rates and forbearance: The MUFG Global Markets Podcast

In this episode, MUFG Head of Agency Mortgage Strategy and Prepayment Modeling, Glenn Schultz, gives us an overview of the most recent prepayment report and how those numbers compare to our Katana machine learning model projections.  He also discusses prepayment expectations on the 30-year 1.5 coupon, as well as the impact of the GDP forecast on delinquency rates and forbearance.

Demand for BoJ Dollar fund-supply operations disappears, the October BoJ meeting, and the outlook for FX and rates following the U.S. election: The MUFG Global Markets Podcast

The Nikkei Average surged on November 9 as investors reacted positively to the new U.S. administration as it began to lay the groundwork for the next four years. Still there are many unknowns about the policy stance of the new U.S. administration, and the risk of the COVID-19 pandemic flaring up again continues to smolder. Coincidently, the Bank of Japan continues to buy assets and will certainly maintain monetary easing. Japanese companies and investors have not yet reacted to these developments judging by Dollar / Yen cross-currency basis and Yen swap rates that have moved only slightly.
In this episode, MUFG’s Chief Japan Strategist, Takahiro Sekido, analyzes the October monetary base data and discusses USD fund-supplying operations as well as the “Summary of Opinions” from the October BoJ meeting. He also updates his views for Dollar / Yen, yen rate, and Dollar / Yen cross-currency basis.

Markets have their say on Biden win: The Global Markets FX Week Ahead Podcast

How are the markets reacting to Joe Biden’s U.S. presidential win and Trump’s efforts to contest the victory?
In this episode, Derek Halpenny, Head of Research, Global Markets EMEA and International Securities, outlines the key areas of focus for investors, including positive equity market gains, expectations of diminished tensions globally, continued USD weakness and outlook for emerging market flows. He also looks forward to Trump’s lame duck session of Congress.
Will a fiscal stimulus package finally be agreed? Listen now for more. 
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