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UNG Remains Range-Bound

Summary The injection to storage was 69 Bcf – close to market expectations. The price of UNG bounced back. The demand for natural gas in the power sector could climb back up on account of warmer weather. The oil and natural gas market remained range-bound in recent weeks. The price of United States Natural Gas (NYSEARCA: UNG ) bounced back last week, even though the injection to storage was close to market expectations and the weather — while it keeps heating up in many parts in the U.S. — hasn’t driven up the demand for natural gas in the power sector. Moreover, the price of UNG remained range-bound for recent weeks. Will the warmer weather start to heart up the natural gas market? According to the latest EIA report , the injection to storage was 69 Bcf, which wasn’t far off market estimates. Over the next few weeks the market estimates the injections to storage will be higher than normal — on average over 85 Bcf per week, while the five-year average is around 65 Bcf. The higher injection could be driven by higher production and even more so by softer demand. But is the demand expected to cool down? As of last week, the natural gas market has cooled down. The demand for natural gas changed course and slipped by 3.2% week over week. Most of this fall came from softer demand in the power sector. Even though other sectors — including industrial and residential/commercial — also saw a decline in consumption. As of last week, total consumption is up by 4.6% year on year. That’s not far off of the current annual outlook growth in consumption. Despite the drop in demand for natural gas in the power sector, in the coming weeks the weather is projected to be much warmer than normal — mainly in the West and parts of the South Atlantic. Also, the cooling degree days (CDD) are estimated to be higher than normal by 9 degrees, and by 8 degrees compared to last year. The higher temperatures and CDD could suggest a rise in consumption in the power sector. How Will the Price of UNG React to the Storage Report? During the winter time, the price of natural gas tends to react to the news about the changes in storage. But during the summer the correlation tends to be weaker and has a smaller impact on the price of UNG. So far this injection season the price of natural gas seems partly correlated to the deviation from market expectations. (click to enlarge) Source: Data taken from the EIA. The natural gas output inched down by 0.2% last week, but it’s still up for the year by nearly 5%. Baker Hughes reported a decline of nine gas rigs to 219. Conversely, oil rigs have gone up by 12 during the previous week. But oil rigs are also down for the year. Finally, the movement in the oil market, which shouldn’t have an impact on natural gas prices, still seems to coincide to a certain extent, as presented in the chart below. The correlation between the two data sets is 0.24. (click to enlarge) Source: Data taken from the EIA. In both cases, energy prices have been range-bound as the market continues to figure out what’s next for the energy market, and if and when we will see a drop in the production of U.S. oil companies. So far, oil and gas companies have reduced the number operating rigs and slashed capex for 2015. But these measures have yet to cool down the U.S. oil and gas yield. The injection season still has a few more months to go, in which the injections to storage are still expected to be higher than normal. Nonetheless, the hotter-than-normal weather in the coming weeks could start again driving up the demand for natural gas in the power sector, which could bring the price of UNG back up. Or, at the very least, it could keep prices range-bound. (For more, please see ” Natural Gas Is Still Floating … Barely .”) Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Investors Turn Away From Municipal Bond Mutual Funds

By Patrick Keon Municipal bond mutual funds have suffered nine consecutive weeks of net outflows. During this time period municipal bond fund have had approximately $3.3 billion leave their coffers. This streak of negative flows comes on the heels of sixteen straight months of positive flows during which time the group took in $31.9 billion in net new money. The lion’s share of the outflows (-$2.5 billion) during the last nine weeks have come from funds in Lipper’s national municipal fund classifications. Amongst those, high yield municipal debt funds (-$1.5 billion) and short-term municipal debt funds (-$0.5 billion) have experienced the largest negative flows. Some of the funds with the largest outflows over the last nine weeks include Nuveen High Yield Municipal Bond Fund ( NHMAX) (-$636 million), Invesco High Yield Municipal Fund (MUTF: ACTHX ) (-$178 million) and Oppenheimer Rochester High Yield Municipal Fund (MUTF: ORNAX ) (-$162 million). Over a third of the total net outflows (-$1.2 billion) for municipal bond flows occurred last week and once again high yield municipal debt funds were responsible for the largest chunk (-$0.47 billion) of the activity. It is possible that the Puerto Rico debt crisis may have been a factor in last week’s spike in outflows from high yield municipal debt funds as both the Oppenheimer Rochester High Yield Municipal Fund and Invesco High Yield Municipal Fund have significant holdings in Puerto Rico municipal debt. (click to enlarge) Share this article with a colleague

Columbia Threadneedle Rolls Out Unconstrained Fixed Income Fund

By DailyAlts Staff Fixed-income yield curves and credit spreads are expected to be dramatically impacted by the Federal Reserve’s interest-rate decisions later this year, and that has put a lot of bond-market investors in a quandary: Should I dump my debt holdings and take on equity risk? Liquid alternatives give even modest investors new options, including “unconstrained” fixed-income funds like the newly launched Columbia Global Unconstrained Bond Fund (MUTF: CLUAX ), which invests across the full spectrum of debt and currency markets in pursuit of absolute returns with low sensitivity to interest rates, credit spreads, and general market volatility. Designed for the New Normal “The fixed income world has undergone structural change and the characteristics that once defined fixed-income asset classes are becoming obsolete – witness the near-zero yields in some high-quality bonds,” said Jim Cielinski, Global Head of Fixed Income at Columbia Threadneedle Investments and one of the funds three portfolio managers, in a June 30 press release . “The Columbia Global Unconstrained Bond Fund is designed to exploit these new investment conditions by having the flexibility to invest successfully across a broad risk spectrum.” In addition to Mr. Cielinski, the fund’s managers include Martin Harvey and Gene Tannuzzo. Mr. Harvey has been with Threadneedle since 2003 and is also the lead manager of the firm’s Euro Aggregate Bond portfolios. Mr. Tannuzzo also joined Threadneedle in 2003 and is a senior portfolio manager for the company’s strategic income and multi-sector fixed income funds. Strategy Already Available in Europe and Asia The Columbia Global Unconstrained Bond Fund’s portfolio managers employ a fundamental, research-driven investment process. They’re also able to leverage Columbia Threadneedle’s team of over 180 professionals managing more than $200 billion in assets. The fund’s managers’ views may be expressed through long or short exposures to interest rate, credit, and currency markets, with the ample flexibility to navigate across various market environments and capitalize on current trends. Its objective is to complement other total return and yield-oriented strategies, and its benchmark is the Citi 1-month U.S. Treasury Bill Index. Although the fund just launched on June 30 in the U.S., the strategy has been available to investors in Europe and Asia for some time now. “I am excited to bring this capability to the U.S. market, which adds to the Columbia Threadneedle Investments suite of absolute return capabilities,” said Mr. Cielinski. For more information, visit columbiathreadneedleus.com . Share this article with a colleague