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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