US NATGAS: Dominion South Price Rises

TD Securities joins several other sell-side analysts to push back and reduce the outlook for Fed rate cuts in light of the US-China trade war de-escalation.

• TD now eyes consecutive 25bp Fed funds cuts at FOMC meetings in October, December, and January to 3.50-3.75% "as the Committee will try to catch up with policy normalization once the tariff impact is confirmed as largely temporary", with rates cut at a quarterly 25bp pace to to "neutral" 2.75-3.00% by Q4 2026.
• Importantly, "we no longer see the need for the FOMC to ease rates below neutral as we had assumed following the Liberation Day tariffs announcement." As of the May FOMC meeting, TD's forecast was for rates to end the cycle at 2.25-2.50% in June 2026, with the next cut in July 2025 (having pushed back their call from June).
• As far as ascertaining the timing for the next cut, "We now expect the activity and labor market data to prove broadly resilient in Q2 but to lose clear momentum in Q3 as higher prices will start to increasingly dent real incomes and profit margins start to shrink. This should set up the Committee for easing in October. By the time of that meeting, we expect most of the inflation passthrough to have materialized. The September CPI report will be instrumental for confirming that the lion's share of the tariff transmission to consumer prices is over."
• On inflation, "we still look for the bulk of the m/m passthrough to consumer prices to occur in June and July, but now project higher August inflation as well. We now forecast the peak of core CPI inflation to come in at 3.8% in Q3 2025, with inflation closing the year slightly lower at 3.7% q4/q4 in 2025 and at 2.6% q4/q4 in 2026."
• For growth/unemployment: "we still look for below-trend economic growth, but no longer forecast a contraction in Q3 economic activity. We now project GDP growth to close the year at 0.8%, up from our earlier forecast of 0.2% q4/q4. We also estimate the UE rate to rise to 4.6% by the end of the year, down from 4.8% before."

ERZ5 98.0625/97.9375/97.8125p fly, bought for 2 in 3k.

• Reoffer yield/price: 2.623%/ 99.893
• Coupon: 2.6% Annual ACT/ACT, short first to 22-October-2025
• Spot ref: 38.4bps vs OBL 2.4 30 #191 @ 100.73/2.239% (HR 107%)
• EU7b 5Y Fixed (Oct. 22, 2030) at MS+28 (guidance was MS+30 Area)
  • MNI had expected a E7bln size.
• Books above EU72b (including JLM interest): Leads
• Settlement: May 21, 2025
• ISIN: BE0000365743
• Bookrunners: BNPP, Barclays (B&D), Citi, Natixis, SocGen
• Timing: Priced, TOE 14.21 CET/ FTT immediately

Details as per market source