JGB TECHS: (H5) Trend Needle Points South

US gas prices rose sharply on forecasted colder weather in January. European February gas prices jumped to EUR 49.00 at the start of Monday’s trading and then eased to finish up 0.5% at EUR 48.23. They are up 0.9% this month and 23% higher than the mid-December low. There is significant uncertainty going into 2025 with the January 1 expiry of the deal allowing Russian gas to transit through Ukraine. 

• US natural gas (February contract) rose over 15% on Monday to $3.92 after a high of $4.20 earlier, 24% higher than Friday’s close. It is now up 22.2% in December. The increase was driven by an expected increase in heating fuel demand as the National Weather Service is forecasting a significant probability of lower-than-average temperatures in the east and Midwest over the coming two weeks, according to Bloomberg.
• Freezing weather could also disrupt US gas production in Appalachia, believes AnalytixAI.
• Forecasters are also expecting mid- and northern-Europe’s winter to shift colder in January with possibly less wind, which will impact power generation and increase demand for gas. The cold snap could last into February, believes Maxar. Temperatures in Mediterranean Europe are forecast to be around average. Current storage levels are now below 75%.
• Bloomberg estimates that around 5% of Europe’s gas consumption would be impacted by the cessation of Russian flows through Ukraine, which now looks likely. They are expected to be replaced by supplies from Norway and LNG imports from the US. 

• RES 3: 96.975 - High Mar 14 
• RES 2: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 1: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
• PRICE: 95.555 @ 15:55 GMT Dec 30
• SUP 1: 95.460 - Low Dec 20
• SUP 2: 95.275 - Low Nov 14
• SUP 3: 94.734 - 1.0% 10-dma envelope

Aussie 10-yr futures recovered well having slipped into the Monday close, undermining early December strength. This works against the previous short-term bull cycle. A continuation higher would refocus attention on resistance at the 96.207 level, a Fibonacci retracement. On the downside, a stronger bearish reversal would instead expose 95.275. 

TYH5 is 109-00+, +0-01+from NY closing levels. 

• US tsys finished near session bests on Monday following much weaker than expected Chicago PMI data. Chicago Business Barometer™, produced with MNI slipped 3.3 points to 36.9 in December. This is the third consecutive monthly decline, with the index at its lowest since May 2024, and below the 2024 average.
• Higher-than-expected pending new home sales (2.2% vs. 0.8% est) and a jump in Dallas Fed mfg index data (3.4 vs. -3.0 est) tempered US tsys support midmorning. The Mar'25 10Y contract traded around 108-30 (+16) through the second half, with the 10Y yield -.0806 at 4.5447% after the bell.
• Projected rate cuts into early 2025 gained momentum vs. Monday morning, levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -14.6bp (-13.6bp), May'25 -20.6bp (-19.5bp), Jun'25 -30.3bp (-28.8bp).
• Reminder for Tuesday's session: Rate futures have full session (1600ET close) while cash Tsys close at 1400ET. Still no decision from the CME Group regarding the "day of mourning" in honor of Pres Carter on January 9, while stocks and Federal Gov is closed.
• There is no cash dealing in US tsys today with Japan out for a bank holiday.