US NATGAS: Henry Hub breaks below $4, for prompt April. Mixed fundamentals
Henry Hub April 25 broke below $4 to end yesterday’s trading and is currently at $3.982 mmcf going as low at $3.97 in overnight trading. Mixed signals on this morning’s fundamentals with both domestic demand and production dropping significantly. This is despite cooler 15day weather forecasts across the Lower 48, data is subject to revision. Production being more inelastic than demand, and with lower storage levels, there is a bear case that supply will revise higher and may outpace the forecasted increase in heating demand.
- Lower 48 natural gas estimated demand slips lower by 4.2 bcf/d to 75.8 bcfd, BNEF shows. NOAA average lower 48 temperatures forecast are lower than yesterday for the balance of March to at-or-below normal, GFS Operational 0z. The additional forecasted demand is seen mostly in the Midwest and Mountains EIA regions.
- US LNG export terminal feedgas is down 130 mmcf d/d to 15.72 bcf, after settling near mtd highs of 15.85 bcf yesterday. On the day, Sabine Pass is down 133 mmcf to 4.6 bcfd, Calcasieu offsetting this drop and is up 145 mmcf to 1.74 bcf, Corpus Christi down 98 mmcf d/d, Plaquemines is also down 43 mmcfd to 1.94 bcfd after setting an all-time high yesterday of 1.98 bcf. Freeport also showing some d/d strength, up 59 mmcf to 1.96 bcf, which is still well below its observed max of nearly 2.2 bcfd.
- US domestic natural gas production also taking a sharp dip lower and is down 2.63 bcf d/d to 104.9 bcf/d today compared to an average of 107.7 bcf/d so far in March, according to BNEF.
- Export flows to Mexico remain sluggish and are up just 0.02 bcf/d today estimated at 5.85 bcf/d, according to Bloomberg. This is down from mtd high of 6.9 bcfd, the 30-day average is 6.38 bcf
- Nymex Henry Hub daily aggregate traded futures volumes was mostly flat d/d, down 17k to 447k on Mar. 17.
- Henry Hub APR 25 down 0.9% at $3.982/MMBtu
- Henry Hub MAY 25 down 1% at $4.046/MMBtu
- Henry Hub APR 26 down 0.5% at $3.992/MMBtu
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US TSYS: Yields Pull Back Again With Consumer Growth Story In Question
Treasuries outperformed global counterparts Friday, fully completing a reversal from a midweek selloff.
- A large miss in January retail sales (-0.9% M/M vs 0.7% prior, -0.2% consensus) represented the biggest sequential drop in 22 months, with a similarly weak "control group" figure leading to a 0.5pp downgrade to the Atlanta Fed's GDP nowcast (to 2.3% GDP growth in Q1, i.e. no acceleration from Q4).
- That was enough to see the 10Y Treasury yield drop 7bp in the subsequent half hour, continuing the downtrend seen beginning in the immediate aftermath of Wednesday's hot CPI release. 10Y yields dropped over 21bp from the Wednesday high to Thursday's low, ultimately ending a tumultuous week 1.5bp lower.
- Yields ticked a little higher in afternoon trade Friday but the curve leaned bull steeper on the day, with the belly outperforming: 2-Yr yield is down 4.6bps at 4.261%, 5-Yr is down 5.7bps at 4.3328%, 10-Yr is down 5.1bps at 4.4782%, and 30-Yr is down 3.9bps at 4.6982%.
- In futures: Mar 10-Yr futures (TY) up 9/32 at 109-08 (L: 108-26 / H: 109-15.5).
- Other data (industrial production mixed, import prices soft) had little lasting impact.
- The coming week’s data schedule is relatively light, due in part to Monday’s Presidents Day holiday (SIFMA recommends bond cash close, equities closed), with initial jobless claims, February prelim PMIs, and regional Fed manufacturing surveys among the highlights. Supply includes 20Y Bond and 30Y TIPS auctions.
- We also get plenty of Fed communications including the January meeting minutes, and speaking appearances by both doves (Gov Waller) and hawks (St Louis Pres Musalem).
USDCAD TECHS: Bear Cycle Extends
- RES 4: 1.4948 High Mar 2003
- RES 3: 1.4814 High Apr 2003
- RES 2: 1.4503/1.4793 High Fb 4 / 3 and key resistance
- RES 1: 1.4380 High Feb 10
- PRICE: 1.4175 @ 16:54 GMT Feb 14
- SUP 1: 1.4107 50.0% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
- SUP 2: 1.4011 Low Dec 5 ‘24
- SUP 3: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
- SUP 4: 1.3894 Low Nov 11 ‘24
USDCAD broke lower Thursday, breaking out of a tight trading range this week and remains soft. A key support at 1.4261, the Jan 20 low, has been cleared and this signals scope for an extension of the current bear cycle - a correction. Scope is seen for a move towards 1.4107, a Fibonacci retracement. Initial firm resistance to watch is 1.4380, the Feb 10 high. A break would highlight an early bullish reversal signal.
OPTIONS: Mixed SOFR Rates Trade To Cap Week
Friday's US rates/bond options flow included:
- SFRH5 95.62p, traded half in 2k.
- SFRH5 96.93c, traded 0.25 in 4k.
- SFRH5 95.75/95.62ps 1x2, Traded 3.75 in 3k.
- SFRK5 97.00c, traded for 0.75 and 1 in 3k.
- SFRU5 95.93/95.81/95.68p fly, traded 1 in 1.5k
- SFRU5 96.50c, traded for 6.5 in 1.5k.
- SFRU5 95.87^, traded for 36 in 5k.
- SFRJ5 95.87/95.75/95.68p fly 1x3x2 with SFRK5 95.81/95.68/95.62p ladder 1x3x2, bought for 10 in 2k.
- SFRM5 95.68p, sold at 2.5 in 10k.
- 0QH5 96.00c, bought for 13 in 3k.
- TYH5 107p, bought for 11 in 15k
- TYJ5 107p, bought for 11 in 17k total.
- TYJ5 107/106ps, bought for 7 in 15k total.
