US FINANCIALS: Jefferies 4Q25 (JEF)

Energy prices were generally lower on Monday with Brent down 2.1% and diesel 2.9%. European gas followed falling 1.9% to EUR 26.745 and US 8.1% to $4.861. Europe’s ongoing mild weather continues to pressure gas with recent strong wind-generated power adding to the downward momentum. 

• Europe rose to EUR 27.800 before trending lower through the rest of the session and is now down 7.2% in December. Inventories started the heating season below 2024’s level but mild weather has helped slow drawdowns. After reaching 83% last month, storage is now around 72.3% but low prices may make it difficult to maintain LNG imports especially if demand rises elsewhere.
• Hopes of a Ukraine peace deal have faded but talks continue between US-Ukraine-Russia. While the EU agreed to stop Russian gas imports, an easing of sanctions from a truce would increase global supplies.
• US gas gave up much of last week’s 10% gain on Monday as forecasts showed warmer weather for mid-December. Prices are now around last Wednesday’s level and up only 0.2% this month.
• There had been concerns that very cold weather was going to disrupt US gas production and transportation. The system from northwestern Canada is now expected to be confined to the northeastern US, according to Atmospheric G2, which means disruptions should be avoided.
• US lower-48 gas production rose 8.2% y/y on Monday while demand was up 30.6% y/y, according to BNEF data. Estimated flows to LNG export facilities rose 2.2% w/w.

In post-Tokyo trade, JGB futures closed weaker, -8 compared to settlement levels, after US tsys came under moderate pressure, 1-4bps cheaper, on Monday.

• US tsys moved away from cheaps after the NY Fed Consumer Sentiment Survey receded to 3.20% from November's 3.24%. A strong Tsy 3Y auction, drawing 3.614% high yield vs. 3.622% WI, contributed to the bounce off session cheaps.
• The main focus remains on Wednesday's FOMC decision, widely expected to deliver a third consecutive 25bp cut after NY Fed Williams' uncharacteristic guidance following the delayed September payrolls report. Potentially contentious meeting with many FOMC members preferring to have paused.
• The dot plot distribution will be watched keenly, whilst we expect the economic projections to show an upward revision for GDP growth and a downward revision for core PCE inflation.
• MNI POLICY: BOJ Unshaken By JGB Volatility. Bank of Japan officials see no need to intervene in the JGB market, even though they expect volatility to persist, and attribute the recent rise in yields to market assessments of the economic and inflation outlook as well as future policy moves, MNI understands.
• Today, the local calendar will see Money Stock and Machine Tool Orders data alongside 5-year supply. The 5-year yield sits at a cycle high of 1.461% (see chart).

Source: Bloomberg Finance LP

• RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
• RES 2: 95.960 - High Apr 7 (cont.)
• RES 1: 95.900 - High Oct 17
• PRICE: 95.255 @ 16:00 GMT Dec 08
• SUP 1: 95.250 - Low Dec 08
• SUP 2: 95.134 - 3.0% Lower Bollinger Band
• SUP 3: 94.418 - 1.0% 10-dma envelope

Aussie 10-yr futures slipped lower again Thursday, taking out the next major support levels in the process. With 95.275 taken out, prices are pushing to new contract lows, opening vol-band support through 95.210 and into 94.474. Any recoveries need to break back above 95.900 to signal near-term bullish traction.