JGBS: Futures Stronger Overnight, US Tsys Supported By Risk-Off

The Australian Office of Financial Management (AOFM) will today sell A$400mn of the 2.75% 21 May 2041 bond. The line was last sold on 18 November 2024 for A$300mn. The sale drew an average yield of 4.8759%, at a high yield of 4.8800% and was covered 3.3333x. There were 49 bidders, 16 of which were successful and 9 were allocated in full.

• The AOFM also plans to sell A$700mn of the 1.50% 21 June 2031 bond on Friday. Accordingly, this week's ACGB supply is lighter than the recent average weekly issuance of $1500mn.
• According to the MYEFO 2024-25 Issuance Program Update from the Australian Office of Financial Management (AOFM), total issuance has been revised to around $95 billion ($46.4 billion has been completed). This includes around $2 billion of Green Treasury Bond tenders ($600 million has been completed). Issuance of Treasury Indexed Bonds is expected to be around $3 billion ($1.7 billion has been completed).
• Results are due at 0000 GMT / 1100AEST.

European gas continued to climb on Tuesday reaching a high of EUR 59.39 before overbought signals drove a move lower to finish the day down 2.8% at EUR 56.42. Prices are still up 6% in February and 15.8% this year. Colder weather is forecast for mid-February, which will increase heating demand.

• Norwegian energy firm Equinor estimates that European gas storage levels could fall to 30% this winter in a worst case scenario and that the region will require up to 350 additional LNG shipments in 2025 to refill ahead of next winter (Bloomberg). Some European governments are looking at ways to encourage refilling storage, which is now around 50%.
• Summer/spring refilling remains a concern with gas prices over those months continuing to exceed those for next winter. March and April contract prices fell yesterday, while those for the subsequent months including 2025/2026 winter rose further. The region is going to be highly sensitive to global production outages over the year.
• US natural gas rose 1.9% to $3.51 after an intraday high of $3.58 due to forecasts for colder weather across much of the US. It is now up over 15% this month and 13.3% in 2025. Gas demand growth continues to be elevated up 28.1% y/y on Tuesday as heating demand rises.
• Increased demand has driven Asian LNG prices higher. 

• RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 1: 95.685/851 - High Feb 7 / High Dec 11 
• PRICE: 95.525 @ 16:05 GMT Feb 11
• SUP 1: 95.300 - Low Jan 14  
• SUP 2: 95.275 - Low Nov 14  (cont) and a key support
• SUP 3: 94.632 - 1.0% 10-dma envelope

The Aussie 10-yr futures contract continues to trade below the Dec 11 high of 95.851. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition. For bulls, a confirmed reversal and a breach of 95.851, the Dec 11 high, would instead reinstate a bull cycle and refocus attention on resistance at 96.207, a Fibonacci retracement point.