EMISSIONS: EU Mid-Day Carbon Summary: EUAs/UKAs Fall on EU Gas, Equities Losses

• US tariffs on Canada were postponed in the hours before they were due to become effective yesterday, with a formal delay to Mar 4.
• PM Trudeau announced Canada is implementing its C$1.3bn border plan and that 10,000 frontline personnel are and will be working on protecting the border. Amongst other appeasing measures announced, it will appoint a fentanyl czar and will list cartels as terrorists.
• USDCAD saw a low of 1.4387 late yesterday (currently 1.4436) to completely reverse yesterday’s lurch to 1.4793. That low probed support at 1.4398 (20-day EMA) after which lies 1.4290 (50-day EMA).
• BoC-dated OIS points to 16-17bp of cuts for the Mar 12 meeting in early trade vs the 25-30bps seen for much of yesterday.
• Intermeeting cut plays have disappeared, with no cuts priced in for 1m OIS vs 2bps seen after the Mexico delay and more than 4bp prior to that.
• CORRA futures implied yields lead climbs in G10 on the day after yesterday’s slide, with yields up to 13bp higher in early trading.
• The Mar’26 yield has climbed 24bp from yesterday’s low seen pre-Mexico delay, leaving a terminal yield of 2.44% (BoC neutral seen between 2.25-3.25%, overnight rate currently 3.00%). It’s still almost 30bps below levels prior to Trump’s inauguration.

• Guidance: MS + 95bp area (IPTs were +120bp area)
• Size: EUR Benchmark (MNI expects E1.5bln)
• Books in excess of E5bln (inc E175mln JLM interest)
• Maturity: 11 February 2037 (12-year)
• Settlement: 11 February 2025 (T+5)
• ISIN: XS2997390153
• Joint Bookrunners: Erste Group, IMI-Intesa Sanpaolo/PBZ, ING (B&D), J.P. Morgan, Morgan Stanley
• Timing: Books to go subject at 13:00GMT / 14:00CET

From market source

Trump's tariff deadline really helped support derivatives markets yesterday, with DTCC data showing over $140bln notional crossing FX options markets - among the busiest sessions of the year, but no surprise given the heavy intraday vol - particularly in CAD and MXN, but EUR/JPY, EUR and CNY also saw strong flows.

• Markets unsurprisingly favoured USD/CAD upside protection - evident in the put/call skew leaning in favour of calls. Calls with a strike at 1.50 and higher saw solid demand of $1.7bln, making up over 10% of all notional traded in the Monday session. While in outright terms that may not seem significant - the rate hasn't traded above that level since February 2003.
• This pattern was even more evident in USD/MXN, through which over $2 in calls traded for every $1 in puts. Markets identified 21.00 and 21.50 as points of topside weakness, although call demand was evident as high as 21.9650 - 22.7500.
• Today's trade has been far more contained - reflecting the turnaround in tariff sentiment this morning. This is typified by the reversal in yesterday's rally for front-end USD/CNH risk reversals, which corrects back to broadly flat.