EMISSIONS: EUAs/UKAs Pullback On Rising Volatility Ahead Of Options Expiry
EUA/UKA Dec25 is tracking a weekly gain of nearly 3% and over 7% respectively, with both hitting a one-month high. However, EUAs are pulling back on the day, with EU gas prices removing some initial gains and volatility ahead of next week’s March futures options expiry.
- EUA DEC 25 down 1.18% at 72.15 EUR/t CO2e
- UKA DEC 25 down 0.04% at 46.52 GBP/t CO2e
- TTF Gas APR 25 up 0.7% at 43.165 EUR/MWh
- NBP Gas APR 25 up 0.9% at 105.25 GBp/therm
- Estoxx 50 down 0.4% at 5427.19
- TTF is higher on the day owing to a strike on gas infrastructure in Sudzha, though has given back some gains through the morning. Mild weather at the end of the season is reducing pressure on storage withdrawals, limiting upside.
- The latest Germany ETS CAP3 auction cleared at €71.56/ton CO2e, up 4.24% compared with the previous Germany auction at €68.65/ton CO2e according to EEX.
- EUA Dec25 implied volatility has hit the highest since 5 Feb as futures contracts are tracking an over 3% weekly gain amid EU gas near 4% gains and ETS linking reconsideration.
- EUA/UKA Dec25 spread narrowed to €16.65/ton CO2e, the lowest level since Oct 2024, amid stronger UKA gains following positive comments from the UK government.
- Political and policy stakeholders are pushing back against the EU’s proposed 90% emissions reduction target by 2040, following the bloc’s delay in publishing the formal proposal from Q1 to Q2 2025.
- The statement published by the UK government late on Thursday suggested that the UK is discussing reinking its carbon market with the EU’s carbon market/ News have supported UKAs this morning.
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EGBS: 10-year BTP/Bund Spread Off Highs As Equities Find A Base
The 10-year BTP/Bund spread has moved away from intraday highs as European equities find a short-term base, but remains 2.5bps wider at 108bps.
- This morning’s equity-led spread widening was exacerbated by ECB Executive Board member Schnabel’s hawkish interview with the FT (even as Schnabel’s comments were in line with her usual stance).
- The spread briefly marked below 104bps yesterday. The prospect of increased joint EU issuance to fund defence spending may have contributed to Monday/Tuesday’s tightening, alongside broader German fiscal risks ahead of Sunday’s election.
- MNI’s German election preview is here.
EUROZONE DATA: Flash Vacancy Rate Steady At 2.5% In Q4
The Eurozone seasonally adjusted flash Q4 vacancy rate was 2.5%, unchanged across the last six quarters and down from a peak of 3.3% in Q2 2022. This suggests little scope for further easing of labour market conditions on the demand side, with further loosening (if any) likely to come via the unemployment rate. Unemployment remains close to historical lows at 6.3% as of December.
- The EC’s expected employment index ticked up to 98.8 in January (vs 97.2 prior), but remains below the 2000-2019 average of 99.5.
- Meanwhile, Eurozone business economy flash Q4 labour costs - also released today - eased to 4.1% Y/Y (vs 4.6% prior) for the lowest since Q3 2022. This is consistent with the ECB’s expectations for decelerating compensation growth, which should eventually feed through into services inflation.
- However, we caveat that Eurostat has to estimate multiple components (e.g. compensation, hours worked) using partial/preliminary data from member states to calculate the flash labour cost data, which makes it prone to revisions in the final release.
EGB SYNDICATION: 15-year SlovGB: Final terms
- Size: E3bln (MNI expected E2.5-3.5bln)
- Books closed (pre-rec) in excess of E9bln (incl. E460mln JLM interest)
- Spread set earlier at MS+130bps (guidance was MS + 140bps area)
- Maturity: 27 February 2040
- Settlement: 27 February 2025 (T+6)
- ISIN: SK4000026845
- Bookrunners: HSBC (DM/B&D) / JPM / Slovenska sporitelna (Erste Group) / Tatra banka (RBI Group)
- Timing: Books closed at 12:00GMT / 13:00CET, allocations and pricing to follow
