LNG: Brazil’s Sepetiba Bay FSRU receives first LNG cargo of 2025: Platts

European core yields saw an early drop reverse late in the session, leaving them a little higher Wednesday.

• Bunds and Gilts strengthened after an overnight trade, in line with a US Treasury rally that kicked off late Tuesday after a solid 7Y bond auction.
• However, a rise in European natural gas prices to 15-month highs amid supply issues and lower temperature forecasts in the region, applied pressure on the space toward the cash close.
• Spanish Q4 GDP came in firmer-than-expected; UK Chancellor Reeves' policy speech was longer-term focused, with little in the way of short-term implications or market movement.
• The German curve bear steepened modestly, with the UK's bear flattening.
• Periphery EGB spreads tightened. OATs underperformed the rest of the space, with spreads widening rift amid discord between the French government and Socialists.
• Focus after hours is on the Federal Reserve decision and communications, and of course Thursday sees the ECB decision (a 25bp cut remains nearly 100% priced - MNI's preview is here). We also get Spanish January flash inflation data (MNI's Eurozone inflation preview went out today, PDF here).

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.6bps at 2.278%, 5-Yr is up 1.6bps at 2.381%, 10-Yr is up 1.8bps at 2.583%, and 30-Yr is up 2.4bps at 2.804%.
• UK: The 2-Yr yield is up 2.1bps at 4.331%, 5-Yr is up 1.5bps at 4.325%, 10-Yr is up 0.8bps at 4.622%, and 30-Yr is up 0.3bps at 5.177%.
• Italian BTP spread down 1.6bps at 107.9bps / French OAT up 2.5bps at 74.6bps  

We've just published our preview of the Eurozone January flash inflaiton round - PDF Analysis Here:

January2025EZCPIPreview.pdf

• The Eurozone January flash inflation round is split across two weeks, with Spain, France and Germany providing data on Thursday/Friday (Jan 30-31), before Italy and the Eurozone-wide prints cross on Monday.
• The data will set the tone for inflation developments through the rest of this year, with the annual basket reweighting taking place alongside regular annual price resets in several categories.
• The MNI median of sell-side forecasts points to headline at 2.4-2.5 % Y/Y (vs 2.4% prior) and core to remain at 2.7% Y/Y.
• Headline inflation is likely to be upwardly impacted by an acceleration in Brent crude and natural gas prices in January, while services inflation remains in focus for the core measure.
• The ECB are considered near-certain to cut rates by 25bps at its January 30 meeting, with a subsequent 25bp cut in March almost fully priced - but there remains uncertainty around the speed and magnitude of cuts beyond Q1, with inflation data a key input into those decisions. 

ERH5 and ERM5 futures saw the most meaningful OI swings on Tuesday. H5 OI fell 34k (indicative of net short cover) while M5 OI rose 23k (indicative of net short setting).

• Total ERM5 OI reached a fresh high of 712k yesterday.
• A mix of net short setting and net long cover was observed in the rest of the strip.