POWER: UK July Track Weekly Increase On UK Gas Gains
Jun-20 08:08
{GB}UK July power is trending higher this week, approaching its highest level since early April, supported by strong gains in NBP amid heightened geopolitical risks. Near heatwave-threshold temperatures across the country this week are also providing additional support.
- UK Baseload Month 1 Jul 25 down 0.71% at 82.67 EUR/t CO2e
- UK Spk Base Month 1 Jul 25 up 13.41% at -10.65 EUR/t CO2e
- UKA DEC 25 up 0.64% at 52 EUR/t CO2e
- NBP Gas JUL 25 down 3.77% at 94.5 EUR/t CO2e
- NBP front-month costs continue to mirror increases in TTF after the escalation in Middle East tensions/conflicts.
- UKAs Dec25 are tracking a weekly net loss of near 5% amid influence from EUAs and equities losses, as the UKA-FTSE correlation has recently tightened.
- UK LNG imports have been nominated at 6.25 mcm/d compared to the five-day flow average of 12.30mcm/d.
- Gas demand -including power – is forecast at 127 mcm/d, significantly below the five-year average of 163 mcm/d, according to National Grid.
- The latest month-ahead ECMWF weather forecast for the UK are well above average for most days. Average temperatures are expected to be at 22.84C on Sat versus the average of 15.55C, according to Bloomberg.
- Power demand in the UK is forecast to decline to 25.52GW on 21 June compared to 27.56GW on 13 June.
- UK wind output has been revised up on the day for late next week, according to SpotRenewables.
- The unplanned outage at the 2GW IFA power interconnector between France and the UK has been extended by one day until Friday 21:00 UTC, remit data showed.
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BUNDS: /SWAPS: German ASWs Little Changed, Looking Through Bond Bear Steepening
May-21 08:08
German ASWs vs. 3-month Euribor are unchanged to +0.3bp, looking through this morning’s bear steepening on the outright bond curve and operating off multi-week lows registered earlier in May.
- Commerzbank note that yesterday’s Dutch government ruling re: the pension fund transition will “bring less demand for core duration, a hedging focus on shorter maturities and more appetite for credit. Most factors argue for ultralong forward disinversion trades and using recoveries during the transition to scale into long-end Bund swap spread shorts”.
BONDS: BTP/Bund spread is eyeing the initial support
May-21 07:43
- The BTP/Bund spread, while showing a small touch wider, it continues to make an attempt through that Psychological 100.00bps level.
- As noted a Week ago, immediate downside target is at ~97.7bps (September 2021 low).
- And a further Tightening interest through would Open to 90.4bps (February 2021 low).
SWAPS: Citi Cautious On Idea Of Further EUR Steepening In Immediate Term
May-21 07:41
Citi identify several risks to existing steepener positioning on the EUR swaps curve (with a particular focus on 30s50s):
- “While originally around half of the total €1600bn assets (at end-2024) were targeted to transition each on 1 January 2026 and 1 January 2027, the DNB’s Q4 survey showed a shift later. Recently PME has shifted its transition from 1 January 2026 to 1 January 2027 and PostNL to April 2026, due to administrative difficulties. This could delay/stagger these unwinds”.
- “Any delay in transition could also be an incentive for funds with policy funding ratio under 120%. They could wait for a recovery in funding ratios from fiscal pressure on global long-end swaps to then add interest rate hedges at cheap levels”.
- Overall, they “suspect that any further 30s50s steepening due to this transition might only happen later in the year when more clarity emerges, for instance, from the next DNB survey, potentially published in July”.
- However, they stress that “the asymmetric long-end exposure to front-end swings has become more compelling over the last six months - which we believe supports 30s50s steepeners from a broader macro standpoint”.
