OIL: WTI Finds Demand Sub $65.00 On US Crude Stock Drawdown
The overnight range for the CLU5(WTI) contract was $64.71 - $65.52, it is currently trading around $65.55 in the Asia-Pac session, +0.48%. WTI found some demand below $65.00 but continues to consolidate within its recent $63 - $68 range. Oil prices continued to range trade and did not find support from the US-Japan deal during European trading as they trended lower. The larger-than-expected US crude stock drawdown though helped them to find a trough and they recovered to finish slightly higher on the day. US crude oil inventories fell by 3.17 million barrels, the EIA said.
- Brent for September settlement is trading at $68.70 a barrel in Asia, +042%.
- “Vishnu Varathan, head of macro for Asia at Mizuho Bank Ltd, said there may be mild buoyancy in crude from a less-dismal demand-side assumption as markets express relief on the worst-case tariff threats being averted.” - BBG
- “The oil-procurement patterns of India’s Reliance Industries Ltd. are coming under scrutiny after the European Union announced new restrictions on diesel made from Russian crude." - BBG
Fig 1: WTI Crude Future Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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JGBS AUCTION: Mixed Demand Metrics For 20Y Auction
The 20-year JGB auction delivered mixed results across key metrics. The low price underperformed dealer forecasts, which were set at 100.50 according to a Bloomberg poll. However, the cover ratio increased to 3.1007x (highest since March) from 2.5007x in the previous auction, and the auction tail shortened dramatically to 0.28 from 1.14 – the longest since 1987.
- As noted in the auction preview, today’s offering featured an outright yield approximately 10bps below last month’s level and 25bps below the cycle high.
- However, the 10/20 yield curve remained near its recent high, its steepest since 1999.
- Overall, today’s result is likely to be seen as better than the performance observed in the 30-year JGB auction earlier this month.
- Post-auction, the 20-year JGB has cheapened 1bp.
JGBS AUCTION: 20-Year JGB Auction Results
The Japanese Ministry of Finance (MOF) sells Y 758.6bn 20-Year JGBs:
- Average Yield: 2.364% (prev. 2.453%)
- Average Price: 100.48 (prev. 99.29)
- High Yield: 2.385% (prev. 2.540%)
- Low price: 100.20 (prev. 98.15)
- % Allotted At High Yield: 20.7575% (prev. 80.8791%)
- Bid/Cover: 3.1007x (prev. 2.5007x)
CHINA: Bond Futures Lower as Equity Rallies
- A decent bounce in risk sentiment sees major bourses strong and bond futures lower.
- The 10YR is lower by -0.06 at 109.08 and remains above the 20-day EMA of 108.99
- The 2YR is lower by -0.01 at 102.51 and sits just above the 50-day EMA of 102.50
- The CGB10YR is at 1.64%
