Maggie Lake Talking Markets Episode 63: Oil - The Match That Sparks A Crisis? With Michael Gayed & Weston Nakamura.
Jun 13, 2025
Michael Gayed, a savvy Portfolio Manager and publisher of The Lead-Lag Report, teams up with Weston Nakamura, the founder of Across the Spread Research, to dissect the market's reaction to rising tensions in the Middle East. They delve into how a spike in oil prices could unsettle Japan's fragile government bond market. Discussions include Japan’s economic strategies, potential safe-haven investments amidst volatility, and the dynamics between stocks and bonds during crises. Their insights promise to put a new spin on your market outlook!
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Oil Spike Driven by Short Covering
- The oil price jump was partly due to short covering fueled by near-record short positions in oil futures.
- Despite the oil spike, traditional flight-to-safety assets like gold and treasuries showed only mild reaction.
Oil Price Spike Threatens Japan
- Japan imports all its oil, priced in USD, so a weak yen plus oil spike worsens inflation.
- This risks prompting Japan to act to strengthen the yen, which can lead to monetary tightening and bond sales.
Japanese Bond Market Pressured
- Japan faces more JGB issuance amid energy price spikes and fiscal stimulus promises ahead of elections.
- Increased supply with less demand (due to BOJ tapering) pressures yields, pushing long-end JGB and US Treasury yields higher.