LNG: Gas Looking Oversold As Market Worries About Tariff Impact On Demand
European gas prices fell 2.2% to EUR 31.70 on Tuesday and only slightly off the intraday low of EUR 31.20. They are now down around 22% in April, and flashing oversold, driven by not only the end of the winter but also concerns over the impact of US protectionism on global energy demand. Uncertainty remains over the progress of US trade negotiations especially with China, which it continues to deny are taking place.
- The sharp fall in gas prices in April in addition to warmer weather has helped the outlook for Europe’s ability to refill storage ahead of next winter. Current weak demand from Asia has also contributed to increased LNG shipments to Europe. However, the region remains vulnerable to unexpected outages and a heatwave, particularly in Asia.
- Scheduled Norwegian maintenance has taken place this week.
- US natural gas rose 1.1% to $3.38 after reaching $3.46 earlier in the session, but it is still down over 20% this month which is part of the shoulder season with little demand for either cooling or heating. The rally was driven by unwinding of oversold positions as forecasts for the eastern and southern US signalled cooler weather, according to the Commodity Weather Group.
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US TSYS: Cash Bonds Richer To Start The Week
TYM5 is 111-17+, +0-11 from closing levels in today's Asia-Pac session.
- According to MNI's technicals team, Jun'25 10Y futures have breached initial technical resistance at 110-26 (Mar 25 high). The medium-term trend condition is bullish, the first key resistance is located at 111-17+, the Mar 20 high.
- A strong risk-off tone has extended into today’s Asia-Pac session ahead of this week's Trump Tariff "Liberation Day" rollout on April 2, not to mention Friday's employment data for March.
- Cash US tsys are 5-6bps richer across benchmarks, with a slight steepening bias, as concern over the health of the US economy fuels demand for haven assets.
- "US Treasuries have outperformed stocks this quarter, heading for a more than 2% gain, while the equity benchmark S&P 500 fell about 5%. It marks the first time since the onset of the pandemic in March 2020 that stocks fell, and bonds rose in a three-month period." (per BBG)
AUSSIE BONDS: Solid Absorption of May-28 Supply With More Demand Present
The latest round of ACGB May-28 supply sees the weighted average yield print 1.15bps through prevailing mids (per Yieldbroker), extending the recent trend of firm pricing at ACGB auctions.
- Moreover, the cover ratio jumped to a robust 4.4250x from 3.5400x at the previous outing.
- As highlighted in the preview, the outright yield was 15-20bps higher than the previous but around 55bps lower than the cycle peak in early November last year.
- Additionally, market expectations for RBA easing in 2025 have become more aggressive ahead of tomorrow’s RBA Policy Decision. While a 25bp rate cut in April is given only a 5% probability, a cumulative 70bps of easing is priced by year-end.
- Also on the positive side, it's important to note that the May-28 bond was included in the YM basket and that sentiment towards global bonds has improved recently.
- There has been no notable movement in the cash line in post-supply dealings.
AUSSIE BONDS: ACGB May-28 Auction Results
The Australian Office of Financial Management (AOFM) sells A$600mn of the 2.25% 21 May 2028, issue #TB149:
- Average Yield (%): 3.6498 (prev. 3.5038)
- High Yield (%): 3.6525 (prev. 3.5050)
- Bid/Cover: 4.4250x (prev. 3.5400x)
- The amount allotted at the highest accepted yield as a percentage of the amount bid at that yield (%): 72.4 (prev. 96.4)
- Bidders 37 (prev. 32), successful 11 (prev. 12), allocated in full 7 (prev. 7)
