The MUFG Global Markets Podcast

The strength of the UK's economy is looking particularly vulnerable in the context of the global stage. China is leading the charge with its economic recovery from COVID-19, fiscal stimulus has helped the U.S. bounce back much more strongly than expected, and the euro is performing better as EU recovery talks move closer to agreement.
 
Lee Hardman, currency analyst, considers whether there is any chance of improvement for the GBP, taking into consideration stalling Brexit negotiations. 

A robust economic recovery associated with the U.S. economy's spring reopening is on a “collision course” with community spread of COVID-19. This wasn't something we expected to happen until after the start of the “new” academic school year and in the days and weeks leading up to the November election. Interest rate and economic forecasts based on these assumptions are clearly at risk. What is an investor to do?
In this episode MUFG Rates Strategist, John Herrmann, evaluates recent developments against his core strategic investment stance of a 2s-30s yield curve steepener.
 
 
 
 

Mixed signals, including an improvement in global economic indicators and what’s increasingly looking like a second wave of COVID-19 infections in the US, have kept USDJPY in a narrow range. That second wave has already caused uncertainty about the US economy and could drive US long-term rates down and weaken the USD. We would also expect it to push global capital flows in general and Japanese investors in particular to developed markets and high quality assets. In this episode, Takahiro Sekido, Chief Japan Strategist of Global Markets Research, MUFG Bank Tokyo discusses global investors’ flows in and out of Japan around the end of June, as well as updates of his view on the Yen, JPY rates and JPY cross-currency basis.

The quieter summer months should not be a moment for complacency, says Derek Halpenny, Head of Research for Global Markets EMEA.
Investors should not to take their eyes off the ball as it just takes a nudge to trigger huge market implications. With attention also turning to the upcoming U.S. election, polls suggest it is currently Democratic nominee Joe Biden’s to lose. What impact could his policies have on pricing? Listen now.

With hospitals running out of capacity due to the community spread of COVID-19 in certain U.S. cities and states, risk of re-opening delays and/or temporary local lockdowns persist. A new academic school year may only complicate matters – for both families and the broader economy. Still, economic growth could outpace consensus expectations and the FOMC’s June projections in 2020 and beyond.
In this episode MUFG Rates Strategist, John Herrmann, with a little more data at his fingertips, re-examines his "Year 2020 Strategy Update," including his view on growth and employment. He also tells listeners what this all means for his core strategic investment stance of a 2s-30s yield curve steepener.

Americans are now less than four months away from choosing their next president and members of Congress. The outlook has changed significantly with the onset of COVID-19, a sudden and severe recession, and social unrest across much of the country. Who will American voters trust to lead them in 2021 and beyond?
In this episode, Jordan Heiber, Deputy Representative in MUFG’s Washington DC Office, looks at how these multiple crises are impacting the election outlook, the expected policy priorities of President Trump and former VP Biden, and what investors should pay attention to as we get closer to November.

The second half of calendar year 2020 began with persistent concerns of spreading coronavirus infections across the world, not to mention a second wave in North America. That, in part, has caused a lack of upward momentum for both USDJPY and Japanese stocks. Moreover, with 10 year Treasury yields in the United States only 0.70% at best and a sell-off in the long-end of the JGB yield curve, the traditional scenario of the US-Japan yield gap driving USDJPY higher no longer holds water.
In this episode, Takahiro Sekido, Chief Japan Strategist of Global Markets Research, MUFG Bank Tokyo discusses tensions in the JGB bond market, JPY cross-currency flows, and BoJ’s monetary policy operations, as well as updates his views on the Yen, JPY rates, and JPY cross-currency basis.

This week Lee Hardman, currency analyst at MUFG, considers whether the current positive upward momentum in sentiment is sustainable as a run of positive economic data shows the initial steps towards a V-shaped recovery.
As well as this, Lee gives his outlook for the Euro within the context of the news that the Bundesbank will keep buying government bonds, amid uncertainty lingering over the future of the EU recovery fund. 
 

Concerns about a second wave of the COVID-19 pandemic have seen global stock markets plummeting. With pressure on the natural resources sector, this provides opportunity for the JPY to strengthen against currencies of countries dependent on this sector. Despite Japanese investors keeping up their JPY 1 trillion per week pace of overseas medium- and long-term bond buying during June, JPY has not seen substantial weakening.
In this episode, Takahiro Sekido, Chief Japan Strategist of Global Markets Research, MUFG Bank Tokyo discusses Japanese investors' EUR bond flows and the impact on EURJPY forward and basis swaps, as well as updates of his view on the Yen, JPY rates and USDJPY cross-currency basis.

The escalation of COVID-19 cases in the U.S. is putting the markets on edge, but isn’t enough to dislodge increased positive investor sentiment for now.
This is, however, leading Derek Halpenny, Head of Research for Global Markets, to believe risks are to the downside.
This week also sees Derek delve into how mobility data is showing how Europe is managing the spread of COVID-19 in a way which is instilling greater confidence than the U.S., and why all eyes are on NZD and Canada’s debt riddled economy. 

There are already signs of a vibrant economic rebound in the U.S. economy. Perhaps this isn't too surprising given the Federal Government’s fiscal response and the Federal Reserve's monetary response, which far exceed the Great Recession. Accordingly, MUFG forecasts a rebound in U.S. real GDP growth and in employment that is stronger than either the consensus estimate or the FOMC’s SEP economic projections.
This recovery, however, may be on a collision course with further community spread of COVID-19. And, to make things even more interesting, this would likely happen in the run-up to the November 3rd National Elections.
In this episode MUFG Rates Strategist, John Herrmann, reviews his "Year 2020 Strategy Update," including his view on second half growth, the path of COVID-19 and the reopening of the U.S. economy. He also shares what this all means for his core strategic investment stance of a 2s-30s yield curve steepener.
 

US stock and oil prices are no longer surging. Although the upward trajectory of the last few weeks has not really worsened, the strong improvement in sentiment does seem to have taken a pause. In addition to the BoJ, the Fed also made a strong commitment to monetary easing at the June meeting. Looking forward, the global yields are likely stay low, and yield gaps amongst major economies are likely to stay tight. Amidst this stasis, Japanese Life Insurance Companies may be a critical driver of price action in foreign exchange and rates markets in the major currencies.
In this episode Takahiro Sekido, Chief Japan Strategist of Global Markets Research, MUFG Bank Tokyo discusses Japanese Life Insurance Company fiscal year 2019 financial results, changes investment flows and JGB duration risk, as well as updates his view on the Yen, JPY rates and USDJPY cross-currency basis.

USD has seen a modest rebound, with dollar performance still very tightly linked to fluctuations in investor risk sentiment.
On the podcast this week, MUFG currency analyst Lee Hardman explains what is behind this trend and the correlation with equities.
Meanwhile in the UK, even positive developments such as the downgrade of the COVID-19 risk level aren’t enough to help the pound, which continues to underperform.
Listen below for Lee’s analysis on why this is and his forecast for GBP going forward. 
 

The June FOMC confirmed that it plans to keep interest rates low, maintain monetary easing, and implement yield curve control. Looking ahead, USD could weaken and downward pressure on US rates could build. Near the end of this quarter, Japanese exporters will likely cover their USDJPY positions reinforcing this price action. However, we expect USDJPY’s lower bounds to remain robust because of Japanese Yen selling flow. 
In this episode Takahiro Sekido, Chief Japan Strategist of Global Markets Research, MUFG Bank Tokyo discusses JPY selling in the April Balance of Payment data, as well as selling from Japanese exporters and investors, and updates his view on the Yen, JPY rates and USDJPY basis.

This week, currency analyst Lee Hardman explains why it's premature to fear the worst after the largest U.S. equity market sell-off since March in the face of fresh outbreaks of COVID-19 in the U.S. and China. With the disappointing news that the UK economy collapsed by a record 20.4% in April, Lee also delves into the reasons behind the underperformance of GBP and explains why Prime Minister Boris Johnson's high level post-Brexit trade talks with Ursula von der Leyen today could be a breakthrough moment.

 
Chair Powell no doubt laid out a dovish outlook for the next few years, if not longer – a view that was shared by nearly all FOMC participants. The FOMC also opened the door for additional monetary stimulus, in a variety of forms. What should investors expect going forward?
 
In this episode MUFG Rates Strategist, John Herrmann, breaks down the June FOMC meeting and tells listeners what it means for the real economy, interest rates and his core strategic investment stance of a 2s-30s yield curve steepener.

The yen has fully factored in first and second round’s supplementary budget and the establishment of a recovery fund in Europe. Position rewinding has weakened JPY, but we do not expect a trend toward more JPY selling positions. We expect Japanese investors to borrow USD early, ahead of the end of the month. Yet, for now USD funds are supplying operation for responding to the COVID-19 pandemic.
In this episode Takahiro Sekido, Chief Japan Strategist of Global Markets Research, MUFG Bank Tokyo discusses recent JPY cross-border flows’ impact on the BoJ’s YCC operations and JGB markets with his view on the Yen, JPY rates and USDJPY basis.
 
 

Recent job figures from the U.S. look promising on the surface, but there's still a long way to go until a full recovery. This puts Wednesday’s Fed meeting front and centre, with heightened calls for continued stimulus.  Derek Halpenny, Head of Research for Global Markets, discusses why he believes the U.S’s debt profile is ‘mindboggling’ on today's podcast, and delves into analysis on a number of other developments across Europe in the past few days, including the fiscal stimulus package announced by Germany. 

The weakness in U.S. nonfarm payrolls, or rather in employment more broadly, over the months of March-April-May is quite utterly without precedent. 
 
With weekly initial jobless claims having surged near 10 million on a month-over-month basis, the May employment report will, no doubt, show tragic job loss. That being said, the re-opening of America over the month of May offers hope that the job market and  the economy is starting to stabilize.
 
In this episode, MUFG U.S. Rates Strategist, John Herrmann, previews the May employment report, including his forecasts for non-farm payrolls and the unemployment rate. He also explores the implications of those forecasts for the Federal Reserve and the yield curve.
 

Tensions between the U.S. and China have weighed on USDJPY, while in other markets the improvement in risk sentiment has prevailed. With Japan’s State of Emergency lifted, Cabinet approval of a second supplementary budget and an increase in JGB issuance, USDJPY can be considered firm. However, our Chief Japan Strategist does not have a bullish bias so any breach of the 200-day moving average (108-109) would require further catalysts.
In this episode Takahiro Sekido, Chief Japan Strategist of Global Markets Research, MUFG Bank Tokyo discusses revisions to the Japanese government’s fiscal year 2020 budget, implications for financial markets, cross border flows and his view on the Yen, JPY rates and USDJPY basis.

In what could soon be known as one of the shortest recessions in history, market optimism is being reinforced by continued lockdown reversals throughout major economies, central banks coming out swinging and evidence showing no pick up in COVID-19 cases. Will this last?
Hear predictions from Derek Halpenny, Head of Research for Global Markets, as he gives his outlook on keeping a neutral view on USD and for the future of GBP as Brexit negotiations loom.

The Coronavirus pandemic has taken an already strained U.S.-China relationship and made it considerably worse. Interdependent but distinct issues like trade, national security, Taiwan, Hong Kong and human rights make this topic a particularly treacherous one for investors to navigate.
In this episode MUFG Washington DC Representative Office's Hana Rudolph, reviews recent developments in the U.S.-China relationship. She also explores how these strains could impact trade relations in the near term as well as the longer-term outlook and implications of these tensions.

On May 22, the BoJ held an ad-hoc monetary policy meeting and announced measures to support SMEs. Even away from that positive momentum is building toward re-starting economic activity, including  lifting Japan’s state of emergency declaration. Meanwhile, concerns simmer about the coronavirus re-conflagrating. Positive market expectations in the wake of government and central bank policy responses around the world have been bolstering risk sentiment and supporting higher global equity prices even as global bond prices have risen.
 
How will this affect cross border flows and financial markets?
 
In this episode Takahiro Sekido, Chief Japan Strategist of Global Markets Research, MUFG Bank Tokyo discusses the BoJ’s May ad-hoc meeting, risk appetite among Japanese investors, cross border flows and his view on the Yen, JPY rates and USDJPY basis.

This week on the podcast, currency analyst Lee Hardman explains why the markets are optimistic and seemingly, in risk-seeking mode.
Europe is seeing eased lockdowns, improving economic indicators and the Franco-German recovery fund proposal pick up steam, prompting the question: is the euro finally at a turning point, or is it just another false dawn?