Julius Baer: petróleo y bonos gubernamentales de EE.UU

Redacción - Viernes, 27 de Mayo

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COMMODITIES

 

Oil: Climbing above USD 50 per barrel, at least temporarily

 

Oil prices dipped below USD 50 per barrel after breaking this much-watched level for the first time in 2016. The bullish news was the big drawdown in US inventories yesterday, while support to prices continues to come from various production outages weighing on supply from key exporters such as Canada, Nigeria or Venezuela. There is optimism about an easing oil glut and a swifter-than-expected rebalancing of the market. However, the story has two tales. Declining inventories deliver bullish headlines, but seasonally they are the norm as demand strengthens into the summer driving season, which officially begins next week. Production outages are temporary and there are indications from both Canada and Nigeria that they will largely restore supply over the coming weeks. The big story in the background is that oil prices in the 50s are attractive for many shale operators and should result in a bottoming of drilling activity and an earlier stabilisation of US oil production. The shale industry is consolidating and the pain separates the wheat from the chaff. While some companies go to bankruptcy, others are upping their production guidance. We maintain our cautious view, seeing more downside than upside from today’s levels, as we expect a persisting supply glut and fear that the excessively bullish sentiment visible in the futures market will eventually reverse. The shale names have likely run their course. 

Big storage drawdowns and the ongoing supply disruptions have pushed oil prices above USD 50 per barrel. Expecting a persisting supply glut and fearing the excessively bullish sentiment we see more downside than upside from today’s prices and maintain our cautious view.

 

Norbert Rücke, Head Commodities Research, Julius Baer

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FIXED INCOME

 

US government bond: Strong demand keeps a lid on prices, Yellen to speak

 

Demand for 7-year Treasury notes was strong at yesterday’s auction, albeit not as exceptional as for the 2-year notes sold on Tuesday. Back then, primary dealers bid for USD51.6 billion of 2-year notes. The Treasury sold USD 26 billion, but because foreign central banks and other bidders enjoy priority allocation, the primary dealers were only allocated 17.7% of their bids, i.e. USD4.6 bn, compared to an allocation of 38.4% or USD9.9bn a month ago. At Wednesday’s auction of 5-year notes, primary dealers received a 21.8% allocation or USD7.4bn, down from 29.8% or USD10.1 bn at the previous auction. Yesterday, the allocation for primary dealers was down again to 18.5% or USD5.2 bn from 20.2% or USD5.7bn on 28 April. Of course, the lower allocation for primary dealers reinforces fears in the market that there is a scarcity of safe assets in the market. Many analysts thus argue that Treasury bond yields can only go down despite the better tone of incoming economic data. Yet we observe that the 10-year swap rate is even lower than the 10-year Treasury note yield, at 1.69% versus 1.83%, respectively. The question is: Why is the swap rate is lower than the Treasury yield if there is a scarcity of bonds? Federal Reserve Chair Janet Yellen is to deliver a speech shortly after lunch New York time. Given the distortions in the bond market, and in view that both the UK and the US will remain closed on Monday, there could be room for some volatile moves in the shorter term. 

We continue to prefer credit risk over duration risk in an environment of solid growth rates and stabilising energy prices. USD high-yield bonds have outperformed their EUR peers in the recovery since February, and we still see more upside potential for the former.

 

Markus Allenspach, Head Fixed Income Research, Julius Baer

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