POWER: End of Day Power Summary: FR-DE March Discount at Lowest This Week
Feb-19 16:50
The French-German March power contract discount has narrowed to its lowest since this week at €17.49/MWh at the time of writing as losses in TTF and emissions have weighed down both contracts.
- Nordic Base Power MAR 25 down 1.8% at 38.6 EUR/MWh
- France Base Power MAR 25 down 5.6% at 70 EUR/MWh
- Germany Base Power MAR 25 down 4.8% at 87.5 EUR/MWh
- EUA DEC 25 down 2.8% at 73.59 EUR/MT
- TTF Gas MAR 25 down 3.9% at 47.275 EUR/MWh
- Rotterdam Coal MAR 25 down 0.5% at 99 USD/MT
- TTF has reversed earlier gains and is down on the day with bearish pressure from efforts to secure peace in Ukraine outweighing yesterday’s reports that the EU will not seek to relax gas storage targets until after 2025 in its upcoming Clean Industrial Deal.
- EU ETS December 2025 allowances have remained for most of the trading session today amid warmer temperatures in NW Europe and as wind speed will be mostly in line with the seasonal average. Losses in TTF from 14:00 GMT are also weighing.
- The UKA ICE auction cleared lower at £41.25/ton CO2e, compared with £44.5/ton CO2e in the previous auction on 5 February.
- EU emissions from consumption reached 4.77bn in 2022, up by 4% on the year, while production emissions fell by 1% on the year to 3.61 bn/t.
- The EC plans to set up a pilot funding scheme this year using existing EU ETS revenues to aid industrial decarbonisation.
- The European Investment Bank (EIB) invested a new record amount of over €7.2bn in green projects in Spain in 2024.
- Spanish hydropower reserves last week - calendar week 7 – declined for the second consecutive week to 58% of capacity, narrowing the surplus to the five-year average.
- Nordic hydropower reserves fell at their fastest pace this year to reach just above 60% of capacity to be at 60.6%, or 76.98TWh at the end of week 7. Stocks were pressured amid stronger demand and lower precipitation in the region. Reserves could slow their pace of decline this week amid warming temperatures and higher hydro balances.
- Italian hydropower reserves last week – calendar week 7 – slowed the pace of their decline – dropping by 0.08TWh to 2.37TWh to be slightly above the five-year average.
- RWE has pushed back against UK government proposals to allow offshore wind projects without planning consent to enter CfD auctions, warning that the move could disadvantage more advanced projects and disrupt the country’s 2030 clean power targets.
- Greece could be revising its offshore wind strategy and pause plans for over 20 floating wind farms to await cost reductions and more favourable market condition.
- Romania is set to join the Association of Issuing Bodies (AIB) by 1 June 2026, marking a step toward integrating into the European Guarantees of Origin (GOO) system.
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CANADA DATA: Capex Plans Firm Despite Uncertainty But Excess Capacity Remains
Jan-20 16:46
In addition to inflation expectation components noted earlier, the BoC’s Business Outlook Survey pointed to some sequential improvement in demand expectations although excess capacity remains and the BOS indicator is still below average. The pick-up in capex intentions is notable to us considering “prevalent” uncertainty around the incoming Trump administration’s policies but it was in part catch-up of postponed plans.
- “Overall business sentiment remains subdued, but firms are beginning to anticipate improvements in sales activity. Meanwhile, businesses expect growth in costs to continue to ease and growth in selling prices to stabilize.”
- “After a period of weak demand, firms expect their sales growth to improve over the coming year. This expectation is largely driven by recent interest rate reductions and the anticipation of further cuts ahead.”
- “With lower financing costs and improving demand outlooks, intentions to increase investment have become more widespread among firms. Part of this is a resumption of previous plans that were postponed.”
- That’s despite “Uncertainty about the effects of the new US administration is prevalent, with firms commonly anticipating higher input costs due to trade tensions” but the fact that this is partly catch-up takes some of its gloss off.
- “Most businesses reported having some spare capacity. Because of this, hiring plans remain modest. Binding labour shortages are not widespread, and most firms describe the availability of outside labour as improved compared with one year ago.”
- With signs of improvement in this report at least partly conditional on further rate cuts ahead, Desjardins, for example, continue to see a case for their baseline of rates going to 2.00% in early 2026.
OPTIONS: Tuesday NY Cut Should Take Focus Given Trump Heads, Return of US
Jan-20 16:36
With the US returning in earnest tomorrow for the first full day of the second Trump Presidency, and the sharp USD swings today, we'd expect focus on Tuesday's expiry schedule to pick up into 10am NY time.
Decent optionality building around the $1.04 handle and above in EUR/USD, while a sizeable strike in USD/JPY at Y156 could limit losses:
- EUR/USD: $1.0300(E2.0bln), $1.0325(E3.3bln), $1.0400(E2.2bln), $1.0415-20(E1.3bln), $1.0450(E921mln), $1.0490-00(E1.4bln)
- USD/JPY: Y153.00($1.5bln), Y156.00-05($2.2bln)
- AUD/USD: $0.6200(A$775mln), $0.6245-50(A$939mln)
- USD/CAD: C$1.4285($703mln)
ECB: /SWAPS: ECB Survey Highlights Deteriorating Market Liquidity In Autumn 2024
Jan-20 16:29
The ECB’s December 2024 SESFOD survey (Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets) reports a tightening in credit terms and conditions between September and November 2024 “as general market liquidity deteriorated”.
- “A small net percentage of survey respondents expected overall terms to tighten further across all counterparty types in the three months ahead (i.e. in the period from December 2024 to February 2025)”.
- “A significant net percentage of survey respondents reported that financing rates/spreads had increased for funding secured against all collateral types”.
- “Survey respondents also reported increased demand for funding across all collateral types. Moreover, they reported a slight deterioration in the liquidity and functioning of collateral markets”.
- A reminder that German paper saw a notable cheapening against swaps through the Autumn, with the Bund ASW (vs 3-month Euribor) tightening from over 25bps at the end of September to below 0bps by mid-November (an all-time/cycle low).
- Despite retracing a portion of those moves in the second half of November, long-end spreads have re-approached those record levels this month. Analysts have highlighted increased free-float from ECB balance sheet run-off and heavy sovereign supply as fundamental drivers of swap spread narrowing in 2025.
- Press release: https://www.ecb.europa.eu/press/pr/date/2025/html/ecb.pr250120~9384966317.en.html
