LNG: Panama Canal Facing Severe Congestion

German swap spreads have widened today, generally extending the recovery from July lows that also coincides with yields moving away from their July highs.

• Desks also stress that prevailing repo levels helped put a base into Schatz spreads earlier this month.
• Long end leads today’s spread widening as the outright yield curve bull flattens.
• Still, spreads remain rangebound multi-week.
• On the broader EUR curve, Goldman Sachs noted the following late on Friday: “although a shortening in the maturity of hedging needs resulting from the Dutch pension reform is likely to contribute to this move over time, we see little evidence that the steepening in the EUR long end reflects this in the near-term. All major 10s30s global swap curves have steepened, which points to a broader realignment of duration demand following the general rise in the distribution of inflationary pressure and ongoing large fiscal deficits. At current levels, our curve model suggests 10s30s trade broadly fair against macro fundamentals”.

• On the commodity front, a bull cycle in Gold that started Jun 30, remains intact and the yellow metal is holding on to its recent gains - for now. Note that medium-term trend conditions are bullish - moving average studies are in a bull-mode position highlighting a dominant uptrend. An extension would expose $3395.1, the Jun 23 high, and $3451.3, the Jun 16 high. The bear trigger is $3248.7, the Jun 30 low. First support to watch is 3282.8, the Jul 9 low.
• In the oil space, a bearish tone in WTI remains intact and the recovery since Jun 24 is considered corrective. The sharp reversal from the Jun 23 high continues to highlight scope for an extension lower. Support to watch is the 50-day EMA, at $65.68. The average has been pierced, a clear break of it would expose $58.87, the May 30 low. Initial resistance to monitor is $71.20, the 50.0% retracement of the Jun 23 - 24 high-low range.

• Treasuries are firmer across the curve as they react to a WSJ report reiterating stances seen last week that the EU is preparing to pushback more firmly against US trade measures. MNI reporting had indicated a similar stance last week.
• Volumes are subdued, in part after a Japan holiday.
• It’s a thin docket today, with the Conference Board’s Leading Index leading the calendar and President Trump not scheduled for any notable events according to Roll Call.
• Cash yields are 2.5-4bp lower on the day, with the front end lagging. Treasuries underperform EGBs, where many 10Y yields are 6-7bp lower.
• Curves flatten away from last week’s particularly elevated levels, with 2s10s at 53.4bp and 5s30s at 103.8bp. The latter compares to Wednesday’s fresh ytd high of 108.5bp in a spike on worries that Trump was going to imminently fire Fed Chair Powell.
• TYU5 trades close to session highs of 111-04+ albeit on low cumulative volumes of 220k.
• It has cleared the 20-day EMA to open resistance at 111-08 (Jul 11 high) with focus on 111-13+ (Jul 10 high). To the downside, support remains at 110-08+ (Jul 14/16 lows).
• Data: Conference Board Leading Index Jun (1000ET)
• Fedspeak: Now in media blackout for Jul 29-30 meeting
• Bill issuance: US Tsy $82B 13W, $73B 26W bill auctions (1130ET)