NATGAS: Mid-Day Gas Summary: TTF Rises

While financial markets continue to pile pressure on the Treasury (see 'GILTS: Further Selling', 1124GMT), political pressure on the gov't is also rising as voter confidence in PM Sir Keir Starmer's ability to boost growth collapses according to recent polling. The inaugural City AM/Freshwater Strategies poll carried out 4-6 January showed 75% of respondents were 'not confident' about the gov'ts plan to achieve economic growth, while 56% of respondents expected the UK economy to worsen over the next year compared to 19% expecting an improvement. 

• The poor polling comes amid reports of collapsing business confidence on the back of Chancellor of the Exchequer Rachel Reeves' 2024 budget tax hikes, as well as speculation that the UK growth outlook and declining fiscal headroom could spur more tax increases later in 2025.
• City AM: "just one in six voters believe Labour is best placed to manage and grow the economy, compared to 20 per cent who think Tory leader Kemi Badenoch could do a better job, and 24 per cent who say the same for Reform leader Nigel Farage."
• The Starmer gov't commands a sizeable majority in the House of Commons and the next election is not due until 2029, ostensibly limiting immediate threats to gov't stability. However, the short tenure of PM Liz Truss in 2022 is demonstrative of how pressure from financial markets can hasten chancellors and prime ministers (if not the party in power) towards the exit door. 

Chart 1. 'How confident are you, if at all, about the UK gov'ts plan to achieve economic growth?', %

Source: City AM, Freshwater Strategy. N.b. Sample: 1,207 eligible voters in the UK, 4-6 January 2025. Margin of Error +/- 2.8%.

Pressure remains, with the latest media speculation surrounding Trump’s tariff preferences supporting the USD and weighing on bonds.

• That limits any recoveries.
• Futures as low as 90.27.
• Yields 6-10bp higher, 10- to 30-Year zone leads the move. 10-Year yields hits the highest level seen since ’08.
• Next level of upside interest in 10s the Oct ’08 monthly high (4.798%), highs of 4.792% seen so far.
• A break above there would expose the June ’08 monthly highs located at 4.862%, which protects the 5.00% level.
• 30s as high as 5.355%. August ’98 monthly high (5.397%) presents the next level of upside interest.

Fig. 1: UK 10-Year Yields

Source: MNI - Market News/Bloomberg

• MBA composite mortgage applications extended their recent slide, albeit with a more modest -3.7% last week after a cumulative -22% in the two weeks prior covering the Christmas holiday period (all figures SA).
• Refis saw some very mild stabilization (+1.5% after a two week decline of -36%) with purchases instead leading the decline in the latest week (-6.6% after -13% over two weeks).
• It comes as 30Y mortgage rates have continued to churn higher, albeit by only 2bps in the latest week to 6.99%. It’s up from 6.67% in early Dec and a recent low of 6.13% in mid-Sep for its highest since July.
• Interestingly considering expectations of looser regulation under incoming President Trump, the regular-jumbo spread at exactly 0bps (from -16bps the previous week) reached its highest since Nov 2023. It is however just a single week and would need to see similar readings in weeks ahead to confirm this trend.