POWER: Nordic March Down 7.5% On Week

Feb-14 08:23

The Nordic forward curve is in the red amid the continued decline of TTF, placing downward pressure on neighbouring Germany. A wetter outlook in Norway is also weighing down the curve.  While temperatures have been revised down over 14-19 February, they are still expected to flip above the norm on 21 February. March is tracking a weekly decline of 7.5%.

  • Nordic Base Power MAR 25 down 3% at 40 EUR/MWh
  • France Base Power MAR 25 down 3.6% at 78.9 EUR/MWh
  • Germany Base Power MAR 25 down 2.9% at 96.27 EUR/MWh
  • EUA DEC 25 down 0.6% at 77.62 EUR/MT
  • TTF Gas MAR 25 down 3.7% at 49.5 EUR/MWh
  • The Norwegian hydro balance is expected higher over 20-28 February, with upward revisions between 100-450GWh. The balance is anticipated at +4.56TWh on 28 February compared to +4.07TWh previously estimated.
  • However, Sweden’s hydro balance is expected unchanged on the day, with the balance ending at +3.96TWh on 28 February the same as the previous estimate.
  • Average temperatures in the region have been revised down over 14-19 February by as much as 0.6C but are still expected to flip above the seasonal average on 21 February and climb as high as 4.7C on 25 February – towards the higher end of the ECMWF forecasts.
  • And precipitation in the region has been revised up over 14-18 February, albeit rainfall will still be below the 30-year norm until the end of February.
  • Closer in, Norwegian wind is forecasted at 1.07GW, or a 20% load factor on 15 February – up from the 0.743GW forecast for today – which could weigh on delivery coupled with a drop in demand.
  • Nordic nuclear availability was at 100% capacity on Friday morning, unchanged on the day, according to Bloomberg. 11 of 11 units are still online.

Historical bullets

GILTS: Rallying & Steepening Following CPI

Jan-15 08:20

Gilts add ~100 ticks in early trade, printing either side of 90.00, before fading back to 89.90.

  • Softer-than-expected CPI data the driver, with markets ignoring the fact that the downside surprise was mostly driven by volatile components.
  • The recent increase in short positioning in futures (flagged in recent days) will be contributing to the move as well.
  • Bearish trend in futures intact, although today’s data puts that at risk. Initial support and resistance located at 88.96 and 90.31, respectively.
  • Yields 4.5-8.0bp lower, curve bull steepens.
  • 5s30s on track for a fresh cycle closing high at current levels, above 86bp.
  • Early dovish move in STIRs extends a little further, with markets pricing in 50bp of BoE cuts through ’25 at one stage before fading back to ~48bp at typing.
  • GBP4bln of 4.25% Jul-34 gilt supply due this morning.
  • Comments from BoE Taylor eyed later (16:30 London), greater colour on that provided in the pre-gilt open STIR bullet.

RIKSBANK: Bunge Re-iterates Support For Front-loading Of Rate Cuts

Jan-15 08:19

Some highlights from Riksbank Executive Board member Bunge's speech at Bopol Live:

  • "The interest-rate sensitive parts of the economy are still weaker than normal, but we see signs that we are close to a turnaround"
  • "We need to boost consumption to strengthen the economy. Stronger economic activity is important in itself, but also a necessary condition for inflation to stabilise close to the target"
  • *"Our forecast is that it may be cut one more time during the first half of 2025. As I argued at the December monetary policy meeting, I judge that it is better to do so in the near term rather than to wait"
  • "There are a number of clouds of uncertainty obscuring the outlook for inflation and economic activity"

Front-loading of interest rate cuts is in line with Bunge's view from the December minutes: " I can imagine that the policy rate will probably be cut again when we meet after the festive season. However, as we note in the draft report, it is also important to consider the delay existing between rate cuts and their effects on the economy"

Bunge's speech also highlighted vulnerabilities in the Swedish economy arising from high private sector debt levels. Commenting on a proposal for more generous credit rules for mortgages, she noted that the Riksbank will provide a fill response in due course, but also noted concern that the proposed changes could increase financial risks, both for households and for banks: "Making it easier to borrow will not solve long-term housing market challenges".

EUR: FX Exchange traded Weekly Option

Jan-15 08:11

FX Exchange Weekly traded Option, expiry Friday, covers the US CPI, IJC, Retail Sales and IP, and the rest of the European Final CPIs.

  • EURUSD (expiry Friday) 1.0675c , bought for 0.00020 and 0.00025 in 2k.

Underlying is slightly higher than the spot at 1.0341.