POWER: Italian Hydro Stocks Fall, Slightly Narrow Deficit
Italian hydropower reserves last week – calendar week 3 – declined by 0.06TWh to 2.13TWh to capacity, slightly narrowing the deficit to the five-year average and last year’s level.
- Stocks narrowed the deficit to last year’s level to 0.62TWh, from 0.66TWh the week before.
- The deficit to the five-year average also slightly narrowed to 0.53TWh, from 0.54TWh in week 2.
- Power demand in Italy increased by 2.77GW last week to 36.04GW.
- Hydropower output from reservoirs last week edged up by 58MW to 395MW, while run-of-river generation declined by 147MW to 1.65GW.
- Gas-fired power generation last week rose by 2.77GW to 19.9GW.
- Wind generation in Italy declined by 2.9GW last week to 2.31GW.
- Precipitation in Torino, near Italy’s hydro-intensive region, stood at 13.5mm last week, above the seasonal average of 3.6mm.
- Looking ahead, the latest Bloomberg ECMWF weather forecast for Torino suggests precipitation is forecast at 12.5mm this week, above the seasonal normal of 2mm.
- The latest two-week ECMWF weather forecast for Rome suggests mean temperatures will remain above normal until early next week before turning cooler.
- Italy’s hydro balance is forecast to end this week at -1.97TWh. The balance is forecast to widen to -895GWh as of 5 February.
- Wind output in Italy for the rest of this week (Thu-Sun) is forecast at 1.3-61.2GW during base load, according to SpotRenewables.
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US TSY FUTURES: TY Sold
A ~2.5K sale of TYH6 futures at 112-12+/12 (DV01 ~$168K) pushes the contact back towards session lows, with the recovery rally in Bunds also stalling in recent trade.
ITALY DATA: Energy Base Effects See First Negative PPI Y/Y Of The Year
Italy domestic PPI saw a strong monthly increase in November, mostly driven by energy, although it didn't match an even stronger increase in Nov 2024 so the year-on-year rate fell into negative territory for the first time in a year due energy base effects.
- Domestic PPI grew 1.3% M/M (vs -0.4% Oct), the largest monthly rise since June. This more than unwound October's drop although was softer than the 1.8% M/M in Nov 2024.
- Istat notes that, excluding energy, prices recorded more moderate growth (0.3% M/M, though this includes foreign markets).
- The Y/Y rate fell into negative territory (-0.3% Y/Y, vs 0.2% Oct) for the first time since November 2024, a somewhat volatile rate but one that has been on a downward trend through most of 2025.
- Again, this was energy-driven, Istat writes "Even the slight year-on-year decline is largely due to the dynamics of energy prices, the decline in which is amplified by the [base effect from] November 2024, when more significant price increases in this sector were recorded."
- "On the domestic market, the year-on-year decline in electricity and gas supply prices extended (-3.8%, from -1.0% in October)."
- In domestic manufacturing sectors, the largest Y/Y increases were seen in "repair and installation of machinery and equipment" (3.1%), "pharmaceutical products and preparations" (2.8%), and "manufacture of metal products, excl machinery" (2.5%).
- Istat also notes strong yearly price increases on the foreign market for transport equipment (6.4%).
SOFR: Futures Flat To A Little Lower, Several Rounds Of Flow In London Trade
SOFR futures are flat to -1.5, with pressure from core global FI markets (albeit with Bunds bouncing off the lows before 10-Year yields could test year-to-date highs) and typically hawkish Fedspeak from Hammack noted over the weekend.
- Several rounds of flow worth highlighting in early London trade:
- SFRZ6 ~6.5K given at 96.900.
- SFRH7/H9 ~3.3K given at 40.5.
- SFRH6 96.56/96.43/96.37/96.18 broken put condor 4K given at 5, desks point to closing out of an existing position.
