EMISSIONS: EU Mid-Day Carbon Summary: EUAs/UKAs Fall on EU Gas, Equities Losses
Mar-06 12:34
EUA/UKA Dec25 is trending downward to move in tandem with EU gas price losses, while declining EU equities exacerbate bearish sentiments. EUA Dec25 is trading at its lowest level since 19 Dec 2024, while UKA Dec25 is at its lowest since Jan 27.
- EUA DEC 25 down 1.9% at 67.51 EUR/t CO2e
- UKA DEC 25 down 2.9% at 38.51 GBP/t CO2e
- TTF Gas APR 25 down 3.9% at 39.9 EUR/MWh
- NBP Gas APR 25 down 2.8% at 97.25 GBp/therm
- Estoxx 50 down 0.5% at 5479
- EUA Dec25 dipped 20% since the price hit a 14-month high on Jan 31, while the UKA Dec25 also declined 20% since the price hit a 7-month high on Feb 10.
- TTF front month has fallen below the low of €40.82/MWh from Feb. 26 as the market weighs EC recommended flexibility in reaching gas storage targets alongside signs of political efforts in Slovakia to renew Russian gas transits via Ukraine.
- The latest EU ETS CAP3 auction cleared at €66.58/ton CO2e, down 2.23% compared with the previous EU auction at €68.1/ton CO2e according to EEX.
- The EU ETS2 price is forecasted to jump from €60/ton CO2e to €149/ton CO2e, between 2027 and 2030, more than doubling within three years amid a sharp reduction allowance supplies and strong demand due to the lack of economical decarbonization options, according to BNEF.
- UK ETS revenues are expected to lose a sum of £2.9bn from 2025 to 2026 without UKAs prices aligning with EUAs, Institute for Energy Economics and Financial Analysis (IEEFA) said.
- UKAs prices are too low to represent real emissions costs as most of the polluters’ emissions have been covered by free allowances, Institute for Energy Economics and Financial Analysis (IEEFA) said.
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CANADA: Yields Extend Tariff-Delay Climb, Intermeeting Cut Odds Disappear
Feb-04 12:27
- 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.
EGB SYNDICATION: Croatia 12-year CROATI: Update
Feb-04 12:19
- 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
OPTIONS: USD/CAD, USD/MXN Topside in Firm Demand
Feb-04 12:04
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.
