The MUFG Global Markets Podcast

U.S. Markets: 2023, a strong start, can it last?: the MUFG Global Markets Podcast

George Goncalves, MUFG Head of U.S. Macro Strategy, argues that the latest price action, as positive and powerful to the upside that it has been, has skewed perception of the macro outlook. Granted, it’s likely that some positive factors – mostly the weather in Europe and contained energy, plus China reopening – have improved the outlook, these alone won’t be enough to overcome the cumulative effective of global central bank tightening and ongoing draining of liquidity via various forms of QT.  In the end, it’s likely yet again another short-term bear market rally in risk assets.
Meanwhile, rates markets continue to defy the Fed and where policy rates will eventually stabilize at. These inconsistencies matter and could also drive Fed thinking. Chair Powell might remind investors that their policies work through tightening financial conditions. We expect a “hawkish” 25bps hike at the next meeting.
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Foreign and Japanese investors cover shorts as arbitrage trading moves from cross-currency basis to the JGB yield curve: The MUFG Global Markets Podcast

Yen rates fell and the Yen has weakened following the January BoJ meeting. The BoJ did not announce any “surprises” this month, but the market is not convinced there aren’t any in store.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido analyses investing flows and sentiment among Japanese and foreign investors based on the latest USTIC and JSDA data. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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FX volatility picks up after BoJ policy decision: The Global Markets FX Week Ahead Podcast

Lee Hardman, Senior Currency Analyst, and Reza Nasehi, Vice President of the Japanese Client Sales Group for EMEA in London, discuss the fallout from this week’s BoJ policy update for the JPY and wider financial markets.
Does the BoJ’s update alter MUFG’S bullish outlook for the JPY?
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The ESG 2023 outlook – 5 themes on the trilemma of affordability, security and sustainability: The MUFG Global Markets Podcast

As ESG’s scope and penetration increased in 2022, so too did the decibels of debate. Surging inflation, the reverberations of the war in Ukraine, the energy crunch and global recessionary angst have called into question the value of ESG considerations, forcing policymakers to reconsider the rank of importance in the energy trilemma pillars – affordability, security and sustainability. Yet, we view louder deliberations and pockets of pushback as indicative of ESG’s burgeoning relevance and a natural and necessary step in its maturation.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses MUFG’s ESG 2023 outlook that was published earlier this week (see here for the full report).
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The BoJ stays the course…for now: The MUFG Global Markets Podcast

JGBs rallied, Yen basis widened, and the Yen weakened in the aftermath of the Bank of Japan’s January Monetary Policy Board meeting. The surprise decision at the December BoJ meeting stoked speculation in the market about further changes this week. Ultimately, the BoJ stood pat but announced some enhanced lending capabilities that could prove significant. 
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews the January BoJ policy meeting, shares his outlook for monetary policy going forward, and discusses cross-border securities investing flows during December. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.

Are fundamentals aligning for a weaker USD? The Global Markets FX Week Ahead Podcast

Lee Hardman, Senior Currency Analyst, and Matthieu Gloux, Head of Global Client Sales in EMEA, discuss why fundamental drivers are creating a more compelling case for a weaker USD at the start of the new calendar year.
Will USD weakness be reinforced by next week’s BoJ policy update?
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Are we in the winter of prepayment or are slow speeds just turnover?: The MUFG Global Markets Podcast

In today’s episode, MUFG Head of Prepayment Modeling and Strategy, Glenn Schultz reviews December’s remittance data and addresses the question: are we in the winter of prepayment or are the slow speeds just turnover? He also discusses relative value across the specified pool and derivative markets.
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2023 outlooks for commodities and energy markets: The MUFG Global Markets Podcast

Amid unprecedented market volatility, Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses MUFG’s 2023 outlooks for commodities and energy markets that were published this week (see here and here).
Ehsan believes that the supply constrained commodities supercycle is still in its early stages, whilst a tolerable 2022 will give way to a much more uncertain 2023 for the global energy complex.
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2023 Macro2Markets Outlook Review: The MUFG Global Markets Podcast

George Goncalves, MUFG Head of U.S. Macro Strategy still thinks it’s a macro-driven year ahead. The economic backdrop continues to worsen in the first half, and it’s possible that the recession hits sooner. The good news – U.S. inflation should continue to decline. By mid-year, the shift from inflation to growth concerns should result in a short-lived Federal Reserve (Fed) pause, and then easing by year-end. However, markets are already pricing to such an outcome on day one! The risk is that instead we get one last major sell-off at the start of 2023 as global rates rise (driven by other central banks – notably the BoJ and ECB along with supply concession). And we also think that risk markets (i.e. stocks) have yet to make their final low, too. While we wait to get clarity on the outlook for the economy, earnings, and risk assets, we make the case to dollar-cost average into bonds. We like L/T USTs/MBS on dips more so than credit, for now. For further information please also see the executive summary of our 2023 Macro2Markets Outlook titled Passing the Baton: A shift from inflation to growth concerns.  
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The outlook for Japanese markets following the Bank of Japan’s surprise change to Yield Curve Control: The MUFG Global Markets Podcast

The Bank of Japan’s surprise monetary policy decision in December hastened a sell-off in the JGB market, a drop in Dollar/Yen, and a tightening of Yen cross-currency basis. The government’s FY23 budget has grown to JPY114 trillion causing upward pressure on JPY rates to likely persist. We suggest investors watch not only BoJ JGB purchases but also BoJ lending and pooled collateral operations. 
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido dissects the December BoJ meeting, the monetary operations that followed, and what he expects going forward. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
Disclaimer: www.mufgresearch.com (PDF)