POWER: Investment Funds Raise Net Short Power Positioning for Third Week
Investment Funds positioning in ICE German power futures continue to increase their net short position for the third consecutive week to reach another fresh high, according to the latest COT data as of 17 Jan.
- Investment Funds net short positioning rose to -13.719mn from -13.683mn in the week of 10 January.
- Investment Firms net short positioning increased on the week sharply to -839,573 from -182,567 the week prior.
- Commercial Undertakings raised their net long positioning to another fresh high, with positioning increasing to 14.569mn from 13.711mn.
Despite the rise in net short positioning recorded by Investment Funds and Investment Firms, the German front-month power base-load contract recorded a sharp increase on the week on 17 January due to weekly price rises in the energy complex.
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EURIBOR OPTIONS: Upside ERG5/ERF5 Structure Lifted
2x ERG5 98.25 calls lifted vs. 1x ERF5 97.87 calls, with paper paying 1.0 on 6.25K for the G5. ERH5 last 97.705.
FOREX: EUR Edges Lower, But FX Ranges Largely Contained
Moving inline with the weakness for European bonds, the single currency has edged lower to be the session's poorest performer, although price action remains muted and ranges well contained.
- Having traded 0.8315 overnight, EUR/GBP is back to negative on the day - having reversed ahead of any test on the 50-dma at 0.8319 - a level markets have failed to break on three occasions in the past week or so.
- EUR/NOK is lower for a second session, extending the reversal off the post-Norges Bank high to just over 1%. Rate is now meeting support at the confluence of the 50-, 100-dmas of 11.7666/65.
- The greenback is more mixed. The USD Index is very mildly higher, but is holding the majority of Friday's slippage - leaving 108.541 the key level ahead.
- As a gauge of lighter volumes and limited liquidity today: EUR futures have traded volumes ~20% below average for this time of day, GBP ~50% lower and JPY ~40% lower.
EGBS: Goldman More Cautious On Prospects Of Bund Outperformance Vs. DM Peers
Goldman Sachs’ new yield forecasts point to “around 20bp of further U.S. Tsy/Bund spread widening from current levels, given the sound foundation of economic divergence.”
- They suggest that “European fiscal support either at the country-level or area-wide level is likely to be modest, and unlikely to alter the 2025 cyclical outlook.”
- “Likewise, while the ECB is shifting in a more dovish direction, recent communication again underscored the lack of urgency to support the economy.”
- However, they caution that “the spread widening already embedded in curves suggests that a relatively protracted period of relative economic weakness in the Euro area is increasingly well-priced, and that risk-reward has become more balanced from a cross-market perspective with the UK or U.S”
- This leads them to conclude that “the clearest path to lower European yields in the near-term may be relief from global duration where pricing, in our view, has turned too bearish in the last month.”
