The MUFG Global Markets Podcast

Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, explains why the focus is on U.S. treasury auctions this week, as the markets nervously eye a potential lift in yields. Added to this, the CPI data for March is also on the horizon, threatening to drive yields up.
Derek also gives his analysis of a reversal trend whereby currencies which did well in the first quarter of the year have underperformed so far in April and his outlook for CAD amidst a lockdown in Ontario and an upcoming Bank of Canada meeting.
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In the latest podcast, U.S. Rates Strategist John Herrmann reviews the most recent monthly employment report, both in terms of the remarkably strong and broad-based growth in nonfarm payrolls, alongside an extremely rapid descent in the number of U3 unemployed individuals.  
John contrasts and evaluates the current jobs performance over the past twelve months to that of the Bernanke cycle over its initial five years and five months (from late 2009 through early 2015). The current cycle is head and shoulders stronger than the Bernanke cycle, and John asks the question, why can Chair Powell not see the glaring difference? 
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We are now in FY21. The Tokyo market volatility has not picked up noticeably. JPY rates and basis are stable as the Nikkei Average rises and USDJPY firms in the JPY110 level. The BoJ has shown that it plans to cut purchases of JGBs in April. The Ministry of Finance plans to increase issuances of JGBs in FY21 but will cut issuances of short-term debt in April. The BoJ’s March Tankan survey showed that Japanese corporate sentiment is improving.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses Japan’s economy and Japanese corporate investing and export assumption exchange rates based on the Tankan survey, as well as the BoJ’s JGB buying plans and the MoF’s stance toward fund supply and demand and TDB issuances in April. He also shares his outlooks for Dollar/Yen, Yen rates, and Yen basis.
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The U.S. is set to lead recovery among advanced global economies, with business confidence looking extremely buoyant as markets price in the good news of strong employment data and speedy vaccine rollout.
This week on the podcast, Lee Hardman, currency analyst, gives a breakdown of what we can expect from USD going forward and what is driving the current sell-off of the currency.
He also takes a close look at what fuelling performance of short term yields, which have been edging slowly higher.
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Chair Powell’s tenure at the FOMC may wind down over the coming ten-months, but while he is still Chair, Mr. Powell has placed the onus upon macroeconomic data outcomes to be strong enough to cause him to budge from his extremely dovish policy stance, both over quantitative easing's asset purchases and over the policy rate anchored at the zero-lower-bound.
In this episode, U.S. Rates Strategist John Herrmann peers into the machinations of the March employment report and his models find numerous indications of a rapid acceleration in employment growth, not just for the month of March, but also for the months of April through October 2021. The household survey—has a mirror image to employment dynamics—may exhibit a very rapid and significant decline in the U3 unemployment rate over the coming ten-months, towards a 2021 year-end rate of 3.91%. John discusses the implications of the data for a 2s-30s Treasury yield curve steepener and a more nuanced 5s-30s Treasury yield curve flattener investment stances.
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This week, Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, takes a look at what is driving the markets as a number of factors hang in the balance with the potential to prompt some surprising price action.
One of these is a third wave of COVID-19 for some European and Emerging Market countries. After a week of negative news on the rising cases and the EU’s stunted vaccine roll-out, what is the impact on EUR/USD?
Listen for Derek’s analysis and new trade idea.
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The March FOMC and Bank of Japan meetings were held last week. USDJPY upside has been heavy, while JPY rates have started to slowly decline after initially rising. The Nikkei Average has remained in a narrow range even while declining. On March 21, the State of Emergency in Tokyo and the surrounding prefectures was lifted, and signs of the economy normalizing have begun to appear. The BoJ recently assessed monetary easing policy and released the results at this month’s meeting including adjustments to policy operations.  
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses the key changes to monetary policy based on the BoJ’s assessment of monetary easing, as well as potential triggers for Yen rate cross-currency basis. He also shares his outlooks for Dollar/Yen, Yen rate, and Yen basis.
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The surprise decision from President Erdogan to sack the current central bank chief has sent the Lira into a tumble as risks to the currency increase to the downside.
The move is getting a thumbs down from market participants, with worries the impact spill over to other emerging market currencies.
Lee Hardman, currency analyst, reflects on these developments and gives a round-up of the movements from the central bank meetings which took place last week.
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Nearly a year ago, MUFG U.S. Rates Strategist John Herrmann’s models initiated a 2s-30s Treasury yield curve bear steepener investment stance, at +108.0 bps on April 15. Nearly a year later, the 2s-30s yield spread is +228.6 bps. This has been a spectacular move, but John does not believe that the steepening move is complete as Chair Powell and his Committee have yet to fully realize and anticipate a very strong economic recovery over the years 2021, 2022, and 2023.
Chair Powell has pledged that monetary policy is no longer to be conducted upon a forward looking basis – a reaction function that explicitly acknowledges the long and variable lead times between policy changes and economic activity. Rather, Chair Powell doubled down upon his claim that the Fed’s policy reaction function will be based upon realized outcomes to economic improvement over the current cycle. In this episode, John Herrmann argues to continue to take the opposite side of Chair Powell’s remarkably complacent view.  
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Upward stress has been building for USDJPY as U.S. rates rise. Even so, Tokyo market speculation about the BoJ’s findings in its assessment of monetary easing due this month has also impacted the JGB market. Japan stock prices have started to rise again, led by U.S. stocks, after dropping sharply. Pricing for Yen cross assets will likely by driven by the BoJ’s policy assessment unveiled March 19.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido offers his outlook for the BoJ’s March board meeting and reviews JPY flow of funds and cross-border securities investing. He also shares his outlooks for Dollar/Yen, Yen basis, and Yen rate.
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This week will see central banks in action, responding to the move higher in yields and bumper Biden fiscal stimulus. What will the main themes be from the Fed, Bank of England and Bank of Japan communications this week, and how will they impact the markets?
Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, reflects on the ECB meeting last week and talks through his outlook for the meetings ahead. Listen now.
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We build in more fully President Biden’s $1.90 trillion Federal fiscal stimulus package. Result: our models forecasts for real GDP growth are now the highest of any of our competitors on Wall Street, with a base case forecast of +9.079% yoy for year 2021 and risk towards +10.25% yoy. Our forecast for the U3 unemployment rate of 3.92% for 2021 remains the lowest of any of our competitors. Our forecast for the unemployment rate at year-end 2022 is 3.11% – the lowest unemployment rate since year 1953.
With such forecasts, U.S. Rates Strategist John Herrmann expects the FOMC to mark their GDP growth figures up towards +8.25% and to cut their unemployment rate forecast towards 4.40% for year 2021. Will the FOMC raise their “dots charts” to signal an interest rate hike much sooner, in 2023? Is it time to enter a 5s-30s Treasury yield curve flattener?
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In today’s podcast, MUFG Head of Agency Mortgage Strategy and Prepayment Modeling, Glenn Schultz, touches on the ideas of the “fence sitter” and how this impacts mortgage prepayment rates, why we are seeing buyouts in low delinquency pools, and the increase in 120+ past due stratifications.
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The state of emergency for Tokyo and surrounding prefectures has been extended by two weeks. The Nikkei Average plunged, JGB rates were up, and USDJPY also rose by last Thursday. JGB rates have paused in their uptrend since last Friday, and USDJPY has also stalled at the lower 108 level. U.S. rates are also inching upward. The focus will be on the monetary stances of central banks around the world, including the BoJ’s yield operations as a test case for post-COVID-19 monetary policy.
In today’s episode, MUFG Chief Japan Strategist, Takahiro Sekido, breaks down recent price action in Tokyo and discusses Japanese and overseas investor cross-border flows. He also shares his outlooks for Dollar/Yen, Yen rates, and Yen basis ahead of the BoJ’s monetary policy review.
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The continued strengthening of USD is rattling low yielding currencies, with no signs of this bullish trend slowing down. The Fed still seems fairly relaxed about the speed at which yields are rising, but can the same be said for the ECB and Bank of Canada, both of which have a meeting this week?
Lee Hardman, currency analyst, gives his view on the likelihood of implementation of policy options such as explicit yield curve control and what to expect for the FX markets for the week ahead.
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U.S. Rates Strategist John Herrmann previews the February employment report. He believes that the February job gain likely may be a solid one, close to +224.1K mom, but that this gain may pale in comparison to the pace of job growth over the months of March through June, which may average stronger than +500.0 per month. Additionally, John’s models continue to forecast remarkably strong GDP growth over the years 2021 and 2022, with the U3 unemployment rate plunging to near 3.98% by year-end 2021 and to near 3.171% by year-end 2022.
With such a favorable economic backdrop and with risk of an FOMC taper announcement in 2H-2021, John’s models continue to predict a further steepening of the 2s-10s and 2s-30 Treasury yield curve over the medium-term.
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In February, JPY rates rose, and USDJPY rose as U.S. rates moved higher. Even the day after the benchmark U.S. Treasury yield touched 1.6% late in February, the BoJ did not indicate it would implement operations to stall a JPY yield rise, allowing upward pressure on U.S. rates to spread to JPY rates. Then, before the BoJ needed to act, Japanese investors stepped in to stem the sell-off.
In today’s episode, MUFG Chief Japan Strategist, Takahiro Sekido, breaks down recent price action in the Tokyo market as well as discusses BoJ JGB buying operations, the MoF JGB auctions, and previews the upcoming BoJ monetary policy review. He also shares his outlook for Dollar/Yen, Yen basis, and Yen rate.
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Yields are continuing to move higher, resulting in a marked acceleration of sell-off in global bond markets. The rise in 10-year Treasury yields has created unease among investors, but the Fed still doesn’t seem spooked. Can this relaxed attitude continue?
Lee Hardman, currency analyst, gives his outlook for global currencies and central banks among this upheaval, as well as his view for the GBP as the UK budget announcement looms.
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The main topic of the week is the move higher in global yields. Lee Hardman, currency analyst, explains why this is positive for the markets, pointing to increased confidence in the global recovery outlook.
This goes hand in hand with recent COVID data showing sharp improvement in cases worldwide, with the vaccine roll-out and various restrictions bringing levels back to those seen late last year.
Lee also talks through what this means for economic rebound and how this focus on yields might impact the upcoming testimony from Fed Chair Powell. Listen now for more.
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Following good growth figures from Japan, better than expected corporate earnings from the U.S., and a continued successful vaccine roll out in the UK, the FX markets have started the week in a positive mood as investor sentiment pivots towards risk-on.
Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, gives an overview of what to expect from EUR-USD trading in the coming months; fiscal stimulus from the U.S. is looking to be larger and sooner than previously thought, but where does that leave the outlook for these two currencies? Listen to Derek’s analysis now.
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In this week’s podcast, U.S. Rates Strategist, John Herrmann, does a deep dive into both the establishment survey and the household survey. He finds a few distortions in the technical aspects of the payroll report that may turn around quickly to support payroll computations over the months of February through June 2021. For the unemployment rate, John’s work continues to uncover the roles played by two significant forces that act to depress the reported U3 unemployment rate (by a few hundred basis points).
All combined, John remains confident that his year-end forecast for the U3 unemployment rate likely may be attained – that of 4.042% – which is far lower than the FOMC’s projection (5.00%), lower than the consensus estimate (5.50%), and lower than even the lowest estimate in the Bloomberg survey (4.10%). In John’s view, markets “taper chatter” likely will become quite loud as the year progresses.  
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In today’s podcast, MUFG Head of Agency Mortgage Strategy and Prepayment Modeling, Glenn Schultz, discusses the January 2021 prepayment speeds and explores if speeds are slowing down and if we are seeing burnout in the premium sector. 
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In Japan, Tochigi prefecture lifted the State of Emergency on February 7, though 10 prefectures including Tokyo city will likely maintain it until March 7. With the chill of February, the COVID-19 pandemic should not be considered a thing of the past. USDJPY rise paused after U.S. employment data was released at the end of last week. JPY buying flows could pick up in February. The BoJ announced it plans to scale back on buying JGBs this month. The MoF will also meet this by cutting issuances of TDBs. Japan is putting its own version of Modern Monetary Theory (MMT) into practice.
In today’s episode, MUFG Chief Japan Strategist, Takahiro Sekido, discusses the MoF’s outlook for the fiscal balance in February, key points for Japan’s 2020 Balance of Payments, and January cross border flows. He also shares his outlooks for Dollar/Yen, Yen rates, and Yen basis.
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GBP forecast for the year ahead is positive following the Bank of England policy meeting last week. Lee Hardman, currency analyst, outlines how the scaling back of expectations for further rates cuts and negative rates along with the continued vaccine roll-out has given way to market optimism.
Lee also looks at the outlook for USD, which isn’t quite as rosy - a recent disappointing payrolls report shows the U.S. economy is recovering, but remains far from normal. Listen now.
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