NATGAS: Incentives to Refill EU Gas Storage Expected: Vitol

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The Foreign Ministers of Japan and South Korea have agreed to expand bilateral relations and continue trilateral cooperation with the United States, in the first meeting between the pair since the political crisis triggered by the impeachment of South Korean President Yoon Suk-yeol in December. 

• Reuters notes that ROK Foreign Minister, Cho Tae-yul, said South Korea and Japan, “agreed to deepen cooperation in various fields,” expressing “deep concern” over North Korea and Russia's military cooperation.
• Cho added: “I believe trilateral cooperation with US  will continue under the Trump administration.”
• Japanese Foreign Minister Takeshi Iwaya said, “Trilateral cooperation with US more important than ever given the current global situation.”
• Iwaya, who is also set to meet acting South Korean President Choi Sang-mok this week, said he “plans to raise importance of trilateral cooperation to the incoming Trump administration.” Iwaya added: “Cho and I discussed future-oriented cooperation between South Korea, Japan and China.”
• The meeting suggests that significant steps towards bilateral rapprochement between South Korea and Japan, led by the administration of US President Joe Biden, may prove durable despite the departure of the three leaders who signed a historic trilateral security pact with the US at Camp David in August 2023.
• The comments may calm fears that Seoul’s political crisis could trigger a retraction of foreign policy connected with the unpopular administrations of Yoon and former Japanese Prime Minister Fumio Kishida, including support for Ukraine and bilateral cooperation regarding North Korea.

Weakness in core global FI markets and European equities promotes widening for EGB spreads vs. Bunds.

• BTPs under the most pressure, widening by ~3.5bp, leaving BTP/Bunds at 120.5bp, within its multi-week range. Incoming BTP supply likely adding further pressure.
• Elsewhere, OATs are ~1.5bp wider vs. Bunds, 85bp caps widening moves for now. ’24 cycle closing highs at 88.4bp presents the major area of upside interest
• Participants eye French PM Bayrou’s inaugural speech to parliament, due Tuesday. French fiscal and political risks remain evident, albeit with Bayrou’s Budget cuts seemingly set to be slightly less aggressive than the draft that toppled former PM Barnier.
• GGBs also widen by ~3p vs. Bunds, unwinding a little of their early ’25 outperformance.