EMISSIONS: EUAs/UKAs Rise on ETS Linkage Calls
Mar-18 16:39
UKA Dec25 rallied after the EU-UK Parliamentary Partnership Assembly called for ETS relinking, while gains were further supported by UK Conservative leader Kemi Badenoch’s speech announcing plans to scrap the party’s 2050 net zero commitment. EUAs rose in tandem with UKAs throughout the day, but most gains were erased on EU gas dip near close.
- EUA DEC 25 up 1.1% at 70.9 EUR/t CO2e
- UKA DEC 25 up 5% at 45.7 GBP/t CO2e
- TTF Gas APR 25 down 1.9% at 40.475 EUR/MWh
- NBP Gas APR 25 down 1.7% at 99.24 GBp/therm
- Estoxx 50 up 0.8% at 5484
- Correlation between EUA/UKA for 30-day period tightened to 0.71 from the 0.69 on the previous day amid relink call.
- The EUA Dec25 premium to the UK equivalent narrowed to €16.59/t CO2e, the lowest level since Oct 2024, amid strong UKAs gains.
- The latest EU ETS CAP3 auction cleared at €68.66/ton CO2e, up 0.19% compared with the previous EU auction at €68.53/ton CO2e according to EEX.
- The trend outlook in ICE EUA futures is bearish and recent short-term gains appear corrective - for now. Initial firm resistance to watch is €73.59, the 50-day EMA. First resistance is at $71.55, the 20-day EMA. Moving average studies are in a bear-mode position, highlighting a dominant downtrend. A resumption of weakness and a breach of €66.78, would open the next key support at €64.05, the Dec 17 ‘24 low.
- EUA Dec25 is forecast to average €71/ton CO2e in 2025, up 6% from €67/ton CO2e in 2024, amid rising power demand, increased hedging activity, and market volatility, BNEF said in its latest note.
- The EU ETS2 price may reach €190/ton CO2e by 2030, with worst-case and base-case scenarios at €122/ton CO2e and €149/ton CO2e, respectively, driven by differences in market horizons, according to BNEF.
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US TSYS: Yields Pull Back Again With Consumer Growth Story In Question
Feb-14 21:08
Treasuries outperformed global counterparts Friday, fully completing a reversal from a midweek selloff.
- A large miss in January retail sales (-0.9% M/M vs 0.7% prior, -0.2% consensus) represented the biggest sequential drop in 22 months, with a similarly weak "control group" figure leading to a 0.5pp downgrade to the Atlanta Fed's GDP nowcast (to 2.3% GDP growth in Q1, i.e. no acceleration from Q4).
- That was enough to see the 10Y Treasury yield drop 7bp in the subsequent half hour, continuing the downtrend seen beginning in the immediate aftermath of Wednesday's hot CPI release. 10Y yields dropped over 21bp from the Wednesday high to Thursday's low, ultimately ending a tumultuous week 1.5bp lower.
- Yields ticked a little higher in afternoon trade Friday but the curve leaned bull steeper on the day, with the belly outperforming: 2-Yr yield is down 4.6bps at 4.261%, 5-Yr is down 5.7bps at 4.3328%, 10-Yr is down 5.1bps at 4.4782%, and 30-Yr is down 3.9bps at 4.6982%.
- In futures: Mar 10-Yr futures (TY) up 9/32 at 109-08 (L: 108-26 / H: 109-15.5).
- Other data (industrial production mixed, import prices soft) had little lasting impact.
- The coming week’s data schedule is relatively light, due in part to Monday’s Presidents Day holiday (SIFMA recommends bond cash close, equities closed), with initial jobless claims, February prelim PMIs, and regional Fed manufacturing surveys among the highlights. Supply includes 20Y Bond and 30Y TIPS auctions.
- We also get plenty of Fed communications including the January meeting minutes, and speaking appearances by both doves (Gov Waller) and hawks (St Louis Pres Musalem).
USDCAD TECHS: Bear Cycle Extends
Feb-14 21:00
- RES 4: 1.4948 High Mar 2003
- RES 3: 1.4814 High Apr 2003
- RES 2: 1.4503/1.4793 High Fb 4 / 3 and key resistance
- RES 1: 1.4380 High Feb 10
- PRICE: 1.4175 @ 16:54 GMT Feb 14
- SUP 1: 1.4107 50.0% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
- SUP 2: 1.4011 Low Dec 5 ‘24
- SUP 3: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
- SUP 4: 1.3894 Low Nov 11 ‘24
USDCAD broke lower Thursday, breaking out of a tight trading range this week and remains soft. A key support at 1.4261, the Jan 20 low, has been cleared and this signals scope for an extension of the current bear cycle - a correction. Scope is seen for a move towards 1.4107, a Fibonacci retracement. Initial firm resistance to watch is 1.4380, the Feb 10 high. A break would highlight an early bullish reversal signal.
OPTIONS: Mixed SOFR Rates Trade To Cap Week
Feb-14 20:47
Friday's US rates/bond options flow included:
- SFRH5 95.62p, traded half in 2k.
- SFRH5 96.93c, traded 0.25 in 4k.
- SFRH5 95.75/95.62ps 1x2, Traded 3.75 in 3k.
- SFRK5 97.00c, traded for 0.75 and 1 in 3k.
- SFRU5 95.93/95.81/95.68p fly, traded 1 in 1.5k
- SFRU5 96.50c, traded for 6.5 in 1.5k.
- SFRU5 95.87^, traded for 36 in 5k.
- SFRJ5 95.87/95.75/95.68p fly 1x3x2 with SFRK5 95.81/95.68/95.62p ladder 1x3x2, bought for 10 in 2k.
- SFRM5 95.68p, sold at 2.5 in 10k.
- 0QH5 96.00c, bought for 13 in 3k.
- TYH5 107p, bought for 11 in 15k
- TYJ5 107p, bought for 11 in 17k total.
- TYJ5 107/106ps, bought for 7 in 15k total.
