LNG: Cold January To Boost Gas Demand For Heating
European natural gas prices fell sharply on Monday likely because of technical selling. They trended lower through the session to finish down 4.9% at EUR 47.21, the lowest since before Christmas, and down 3.4% this month. This is despite drawing from inventories at the fastest pace in seven years. The weather is forecast to stay cold across north-western Europe for now increasing heating demand.
- European storage is around 70% full compared to 86% this time last year, according to Bloomberg. Energy provision through winter is unlikely to be disrupted but low inventories may make refilling during spring/summer more challenging.
- US gas rose 10.7% to $3.71 to be up 2.2% in January to date as severe wintery weather boosted heating demand and impacted some gas output and pipelines. Forecasts are signalling that temperatures are likely to remain below average to January 21 and frozen gas infrastructure is expected to increase.
- Global demand for US LNG has been strong and Reuters is reporting that some traders believe prices rose sharply due to close to record flows to LNG export facilities.
- After the pipeline to Europe through Ukraine was shut on January 1, Russia is looking at other buyers for its gas. It is planning to increase its LNG exports, which Europe has bought a record amount of, and pipeline flows to China.
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MNI UST Issuance Deep Dive: Dec 2024 (2/2)
Throughout November’s policy and market volatility, though, Treasury auctions largely impressed, with 5 of 7 nominal coupon sales trading through.
- Auction Results: November’s nominal coupon auctions were generally strong, with five out of seven auctions trading-through, of which four saw a positive reading on MNI’s Relative Strength Indicator (RSI). The remaining two auctions; 3 and 20-year auctions tailed. See page 2.
- Upcoming Supply: Issuance resumes next week with sales of $58B in 3Y Note, $39B in 10Y Note (reopen), and $22B in 30Y Bond (reopen). December is set to see $15B in nominal Treasury coupon sales, in addition to $22B in 5Y TIPS and $28B FRN for a total of $365B – slightly below the Oct and Nov totals of $369B which were joint-highest since Oct 2021.
- MNI's review includes a calendar of upcoming auctions and buyback operations.
US TSYS/SUPPLY: MNI UST Issuance Deep Dive: Dec 2024 (1/2)
MNI's latest US Treasury Issuance Deep Dive has just been published (PDF link here):
November proved a dramatic month for Treasuries. Yields were volatile before and after the Nov 5 election - after ending October at 4.28%, 10Y yields peaked at five-and-a-half-month high just above 4.50% mid-month before closing November just below 4.18%, as markets attempted to price in the implications of a Republican “sweep”.
- Also buffeting rates was speculation over the would-be successor to Treasury Secretary Yellen. President-elect Trump’s selection of hedge fund manager Scott Bessent was greeted with bull flattening in the curve, implying perhaps that he’s seen as more cautious on fiscal deficits than some of the alternatives (he has expressed support for halving the annual budget shortfall to 3% of GDP).
- The first quarterly Refunding process of Bessent’s Treasury is in early February, by which point we may start to have a better sense of the incoming administration’s approach to both fiscal policy and to more issuance-specific considerations such as duration management.
- Bessent for instance has argued that Yellen’s Treasury erred from a risk management perspective by boosting short-duration issuance, and there are suggestions he would be in favor of reversing course, telling Bloomberg in June “When rates are very low, you should extend duration…I think it’s very unfortunate what Secretary Yellen’s doing. She’s financing at the front end, and she’s making a bet on the carry trade, which is not good risk management.”
US LABOR MARKET: MNI US Employment Insight: Soft Enough To Keep Fed Cutting
Our latest Employment Insight has just been published and emailed to subscribers.
