POWER: Nordic June Could Drop on Wetter Outlook, Temps But TTF Supportive
May-26 06:57
The Nordic June could be weighed down by generally upward trending hydro balances, with upward revision of mean temperatures in the region. However, gains in TTF coupled with nuclear works over the month are supportive.
- Nordic Base Power JUN 25 closed down 2.5% at 27 EUR/MWh on 23 May
- Germany Base Power JUN 25 down 1% at 74.4 EUR/MWh
- EUA DEC 25 up 2.1% at 73.03 EUR/MT
- TTF Gas JUN 25 up 1.5% at 37.005 EUR/MWh
- The Norwegian hydro balance was revised slightly higher over 27 May-8 June but was revised lower on 9 June by as much as 200GWh. The balance is anticipated at +4.77TWh on 9 June compared to +5.02TWh previously estimated.
- It is important to note that Norway’s hydro balance is still expected to be on a general downward trend until at least 9 June.
- Sweden’s hydro balance has also been revised higher and is anticipated to be at +7.89TWh on 9 June, compared to +7.83TWh in the previous estimate. The balance is also expected to be on a general upward trend until 9 June.
- Nordic hydropower stocks increased at their fastest pace since week 18 to be at 51.8% of capacity at the end of week 20 amid higher precipitation and lower power demand. However, stocks narrowed their on-year surplus to the lowest so far this year.
- Rainfall in the Nordics was revised higher over 27-30 May and will be mostly above the 30-year norm throughout the 14-day ECWMF forecast.
- Average temperatures in the region have been mostly revised higher over 26-31 May. Despite this, mean temperatures will be slightly below the seasonal norm for most days over the two-week forecast.
- Closer in, Norwegian wind is forecast at 1.15GW, or 22% on 27 May – down from the 1.25GW forecast for today – which could place some upward pressure on delivery costs.
- Nordic nuclear availability is at 64% capacity on Monday morning, down from 65% on Friday, according to Bloomberg. 8 of 11 units are still online.
- The 890MW OL2 nuke started planned works on 25 May, and the unit will remain fully offline until 15 June, according to the latest Remit data.
- However, the 890MW OL1 has returned and is at around 857MW of capacity at the time of writing, according to data from TVO.
- The 1.4GW OS3 and 1GW RH3 nukes will return on 15 August and 16 June, respectively.
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US TSYS: Extraordinary Measures And Cash Look Sufficient To Head Off X-Date
Apr-25 20:32
Treasury has about $164B in "extraordinary measures" available as of April 23 to avoid hitting the debt limit, per its regular report out Friday. That's out of a maximum total of $375B (they have used $211B).
- With Treasury cash looking healthy (around $600B), that's a fair amount of dry powder to get through the summer months to wait out the debt limit impasse. Tax receipts have looked strong with tariff revenues also starting to boost cash flows, further reducing the near-term urgency to adjust bond issuance.
- This has also helped push back analyst “x-date” expectations to later in the summer/September. We expect to hear from Treasury about its own x-date assumptions next week.
US TSYS: Treasury Market Trading Stayed Orderly In April: Fed Report
Apr-25 20:25
Liquidity across financial markets including the Treasury market deteriorated after President Trump's April 2 reciprocal tariffs announcement but market functioning was generally orderly, according to the Federal Reserve's semiannual report on financial stability, released Friday. (PDF link is here)
- Treasury market liquidity has been poor for years and yields were particularly volatile in early April, contributing to a deterioration in market liquidity, the Fed said.
- Nevertheless "trading remained orderly, and markets continued to function without serious disruption," according to the report, which looked at information available as of April 11.
FED: Ex-Gov Warsh: Fed Has Failed To Satisfy Price Stability Remit
Apr-25 20:22
From our Washington Policy Team - Some fairly sharp words today from ex-Fed Governor Warsh on the central bank (who for what it's worth is seen by betting markets as by far the frontrunner for the next Fed Chair):
- The best way for the Federal Reserve to safeguard its independence is for policymakers to avoid expanding the institution's role over time, including wading into policy areas that are outside its core mission, former Fed Governor Kevin Warsh, a leading contender to replace Jerome Powell as chair next year, said Friday.
- "I strongly believe in the operational independence of monetary policy as a wise political economy decision. And I believe that Fed independence is chiefly up to the Fed," Warsh said in a speech at a Group of Thirty event on the sidelines of the IMF meetings. "Institutional drift has coincided with the Fed’s failure to satisfy an essential part of its statutory remit, price stability. It has also contributed to an explosion of federal spending." His speech made no mention of Trump's tariffs or the appropriate monetary policy to deal with them.
- He said the ideas of data dependence and forward guidance widely adopted by Fed officials are not especially useful and might even be counterproductive.
"We should care little about two numbers to the right of the decimal point in the latest government release. Breathlessly awaiting trailing data from stale national accounts -- subject to significant, subsequent revision -- is evidence of false precision and analytic complacency," he said.
"Near-term forecasting is another distracting Fed preoccupation. Economists are not immune to the frailties of human nature. Once policymakers reveal their economic forecast, they can become prisoners of their own words. Fed leaders would be well-served to skip opportunities to share their latest musings."
