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By Oliver Jakob, International CRO, MUFG
How would you analyze the current US and global recovery rates and what impact is this having on the treasury department?
In general, there is a broad-based recovery supported by expansive fiscal policy and extremely accommodative Central Bank policy. The United States jumped ahead of other regions, driven by faster access to vaccines and large-scale fiscal investment at the federal level. Europe has caught up in vaccination statistics and is seeing a number of reduction in anti-virus measures.
It remains to be seen to what extent the delta-variant is disrupting these trends. Long-term market rates has retraced a lot of their increases earlier in the year, but Corporate Earnings, Job Market trends and Economic Statistics continue to come in quite strong – even acknowledging the lag generally inherent in these measures. In the medium-term, it will be important to watch the market’s reaction to Central Bank tapering if and when it happens.
For the Treasury, the main results are low rates with the pressures on Net Interest margin, excess deposits and relatively low Loan-Deposit ratios. These are trends that need to reflected in the overall strategy. Generating good-quality assets with attractive yield characteristics will be at a premium going forward – in addition to activities that lead to fee-based revenue.
