FED: Fed’s Schmid Also Believes Best To Hold While Monitoring The Economy

European natural gas prices fell sharply following US President Trump’s threat to impose 50% tariffs on US imports from the EU. They did recover to be up moderately on the day and following the call between EC President von der Leyen and Trump and an agreement to continue talks and delay any reciprocal tariffs until July 9 they may rise as oil and US gas prices have done. 

• European gas finished Friday up 0.5% to EUR 36.53 to be up 1.3% this month. It fell to a low of EUR 35.42 following the US trade warning. It has been able to make progress on storage refilling during the shoulder season but with scheduled maintenance and cooling demand likely to increase in the northern hemisphere, that could become more difficult.
• The EU is considering prohibiting the Nord Stream gas pipelines, barring 20 Russian banks from SWIFT, reducing the G7 oil price cap to $45 and EUR 2.5bn of new trade sanctions.
• US gas rose 1.9% to $3.31 to be down 0.4% in May but rose to $3.40 at the start of Monday’s trading. Friday’s rally was driven by rising expectations of increased cooling demand as warmer weather is forecast for much of the US at the end of May/start of June.
• US lower-48 gas output rose 4.8% y/y on Friday with demand up 2.3% y/y.

Relative to recent weeks, last week saw a very modest inflow overall into Asia with India experiencing a large outflow Thursday. 

• South Korea: Recorded outflows of -$64m as of 23rd, bringing the 5-day total to -$245m. 2025 to date flows are -$11,605. The 5-day average is -$49m, the 20-day average is +$67m and the 100-day average of -$114m.
• Taiwan: Had outflows of -$103m as of 23rd, with total inflows of +$645m over the past 5 days. YTD flows are negative at -$10,445. The 5-day average is +$129m, the 20-day average of +$446m and the 100-day average of -$120m.
• India: Had outflows of -$635m as of the 22nd, with total outflows of -$560m over the past 5 days.  YTD flows are negative -$10,647m.  The 5-day average is -$112m, the 20-day average of +$195m and the 100-day average of -$121m.
• Indonesia: Had inflows of +$36m as of the 23rd, with total inflows of +$131m over the prior five days.  YTD flows are negative -$2,816m.  The 5-day average is +$26m, the 20-day average +$11m and the 100-day average -$32m.
• Thailand: Recorded inflows of +$54m as of the 23rd, inflows totaling +$130m over the past 5 days. YTD flows are negative at -$1,618m. The 5-day average is +$26m, the 20-day average of -$7m and the 100-day average of -$17m.
• Malaysia: Recorded outflows of -$9m as of the 23rd, totaling -$92m over the past 5 days. YTD flows are negative at -$3,183m. The 5-day average is -$23m, the 20-day average of +$33m and the 100-day average of -$22m.
• Philippines: Saw inflows of +$2m as of the 23rd, with net outflows of -$32m over the past 5 days. YTD flows are negative at -$256m. The 5-day average is -$6m, the 20-day average of +$2m the 100-day average of -$3m.

TYM5 is trading 109-25+, down 0-09 from its close.

• No Cash today
• Bloomberg - “Speaking to Fox News, US Treasury Secretary Scott Bessent says that President Donald Trump "believes EU proposals [on trade and tariffs] have not been of good quality". Says the Trump move to impose 50% tariffs on the EU is in response to the Union's slow pace in talks. Bessent: "We hope this lights a fire under the EU....the EU has a collective action problem.”
• (Bloomberg) -- “Asset managers aggressively de-leveraged in the week ending May 20, CFTC data show, cutting net long positioning across most Treasury futures. In the long-end of the curve, hedge funds added a large amount to net short in ultra-long bond futures over the week.”
• The 10-year found sellers back towards 4.45% on Friday night and then moved higher to close back above 4.50%. Dips look likely to see supply in the short-term, should yields hold above 4.40% the target looks to be the 4.75% area. Watch for any announcements relating to the SLR, this could cause a knee jerk to a market that is already quite short.