Japan is one of the most energy sensitive countries in the world and the BoJ is not (truly) willing to underpin the JPY. We aim at exploiting this in a RV trade in Asia.
Japan Watch: How will Ueda cope with all of the “pauses”?
Ueda has got the situation under control and managed to orchestrate a whole string of positive market developments on the back of his monetary policy mix. There are no major reasons to change course. Steepen the JPY curve slowly, while accommodating the short-end.
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Something for your Espresso: The Japanese fear of becoming a release valve
Masato Kanda threatens with intervention in JPY as the Japanese case risks becoming the release valve for pressures in China. Equity markets behave as we expected given the renewed pressure >7.30 in USDCNY.
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Steno Signals #59 – When it rains on Janet Yellen, it pours!
The Bank of Japan has fueled a global curve steepening and the US Treasury is forced to emphasize the trend with substantial ramifications for liquidity, rates, FX and equities. Here is how we play it!
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Something for your Espresso: Duration is hard to swallow
The market struggles with duration issuance as the positioning is already loaded with bonds, while the BoJ keeps weakening the JPY (on purpose) as they continue to crowd out investments.
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Japan Watch: Flows in JPY and JGBs after the YCC decision
How on earth can the JPY weaken when 10yr JPY yields are on the rise? We look at flows and investment mandates and how they impact the JPY and JGBs. We still see 150+ on the horizon for USDJPY.
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Japan Watch: 1% with added flexibility – more or less printing from here?
The Bank of Japan did indeed move the needle as the big spike in the short-term inflation forecast provided them with an excuse. The big question is whether the move will lead to more or less printing? And whether the packaging is dovish enough to keep markets calm?
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Japan Watch: The pros and cons for Ueda
It seems carved in stone that the Bank of Japan will have to revise the inflation path higher again in projections but will it be enough for Ueda to move the needle on the yield curve control? Here is our list of pros and cons and our base-case!
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5 Things We Watch – PMIs, FX, Japan, Brazil, Inflation
This week our primary focus is the current business cycle, where we try to figure out which stage we are in, and what outlook different asset classes are pricing in. Today’s edition of ‘5 Things We Watch’ is no exception.
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Japan Watch – Buy the JPY? >150 more likely than <130 in USDJPY
With the recent move in swap rates and the JPY, we have once again looked into Japan to find out when BoJ will do something about their policy and if the Yen is a viable option for your portfolio. JPY looks more like a sell than like a buy here.
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5 Things We Watch – US CPI, Japan, Positioning, Fed Borrowing and Oil
With the US inflation report coming in later today, we have a look at the 5 things that we are keeping an eye out for in markets.
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Something for your Espresso: One thing is certain – ECB sources!
The ECB members agree on a hike in July, but September is still in doubt after what may have been the most hilarious update to staff projections in recent years. Rear-view mirror policy-making continues.
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Something for your Espresso: An ISM report with “pause” tattooed all over it while the RBA hikes
The ISM Services report had “pause” tattooed all over, while the RBA hiked this morning in a surprise move. Is the RBA a harbinger for the BoJ? We also took notice of the WSJ story in increasing capital requirements for banks.
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Earnings Watch: Which Equity markets offer the best opportunities across the Pacific?
The U.S. and Japanese equity markets present a contrast in earnings expectations, driven by differing economic conditions and monetary policies. Will the optimism for U.S. earnings growth last, and has the immense influx of capital to Japanese markets overbid fair value?
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Trade Alert: Five trades added to our portfolio
Our portfolio is live, and we have added USDCNH, long Japanese equities, long 2yr USTs, long EM Local Govies and the FOMO AI trade. Details are attached here.
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Something for your Espresso: The G7 doves are coooooooing!
The G10 central banks coordinately called the peak in global inflation after the Davos gathering earlier this year and now BoJs Ueda has hinted that central banks agreed at the G7 meeting that they should patiently wait and see for the effects on already implemented. The doves are cooing!
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Steno Signals #46 – Liquidity is drying up fast! Sell in May and go away?
We have been bullish on equities through the year but now see increasing signs warranting a defensive shift in positioning. Liquidity is drying up both in Europe and the US, and BoJ has effectively made further liquidity adding interventions unnecessary. China may be the only place on earth with positive liquidity trends.
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5 Things We Watch: The return of the banking crisis, Japan, China, Liquidity and Euro Inflation
The banking crisis seems to be back, Asia is apparently the new black, and the hopes of an economic comeback in the West is vanishing. Things are certainly not as we thought a couple of months ago, but follow along as we look at the best hideouts in this week’s edition.
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Japan Watch #2: Ueda is under increasing pressure to act
The first meeting with Ueda at the helm takes place this week. The Bank of Japan is under increasing pressure to act and the Finance Ministry (and Warren Buffet) seems to be preparing for higher interest rates.
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5 Things We Watch: (Dis)Inflation, FOMC Meeting Minutes, The Debt ceiling, Energy and Japan
With the banking turmoil leaving the headlines (for now), we turn our attention towards the main themes in the broader macro landscape. What’s going on with inflation? What will the Fed do? Is oil turning bullish? And what about Japan? As always we keep you updated on the 5 biggest themes of the week. Enjoy!
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Steno Signals #35 – Has global liquidity bottomed already?
We have been spending countless hours discussing the liquidity outlook in the US, but developments elsewhere are equally as interesting. JPY and CNY liquidity is on the RISE, which has turned the tide on “global liquidity”. Position accordingly?
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Good morning, America: Kazuo Ueda – who?
Is Kazuo Ueda another trial balloon from the Japanese government or is this a confirmation that politicians seek a break-up with the ultra-loose policy of Kuroda?
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Something for your Espresso: Japanese inflation beating ALL expectations (except ours)
Tokyo inflation solidifies our theory that Asian inflation (Japan, China, Taiwan and parts of Oceania) will continue to rally during Q1-Q2, while the actual production is BACK in the West.
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5 Things We Watch: APAC-inflation, The New BoJ Governor, US Wages, Green Shoots and Natural Gas
Every Wednesday our Head of Research, Andreas Steno, goes through the 5 most important themes/charts in global macro right now and how we assess them. Enjoy!
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Something with your Espresso: It is getting hot down under, which will put pressure on BoJ AGAIN
Morning folks Smoking hot CPI report out of Australia. Good news for our AUD longs and a cementation of a too dovish pricing of RBA currently peaking at 3.75% in Q3. If the RBA were to copy/paste the playbook of the Fed or the ECB and aim for positive real rates… Oh boy a repricing that would prompt. We wouldn’t rule out such a repricing since we find that the APAC inflation cycle lags Europe and the US. Europe’s energy woes increased price pressures on Natural Gas in the APAC region with a time-lag, and this is one of the reasons why this region is now under inflation scrutiny. This is of relevance for Bank of Japan as well. Australian CPI empirically leads Japanese CPI by 3 months, which leads us to the conclusion that Japanese inflation is headed for 5-5.5% in the next 3-4 months. Quite a backdrop for a new Governor in BoJ and a HISTORICAL chance to at least partly scrap the YCC. Bring on speculation about a change of policy via the JPY release valve again. Chart 1. Australian CPI leads Japanese CPI We saw a decent bounce in both US and European S&P PMIs, but no one really cares about them, since the Leading Economic Indicator (LEI) out earlier this week points to ISM Services clearly below 50… Yesterday’s market reaction was also telling with no positive reaction to the rebound in PMIs, since the crowd was CLEARLY leaning that way ahead of the PMIs. […]
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Bond Watch – Kuroda the rug-puller.. What is priced in for BoJ?
It is a BIG week in Japanese central bank history with widespread speculation of another increase to the trading range of 10yr JGBs in the yield curve control program. More than 35 bps are priced in, but will BoJ fail to deliver?
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