POWER: UK DA Climbs Further, Could Continue Rise for 14 March Delivery
Day-ahead prices in the UK climbed further from the previous session amid forecasts for firm power demand and lower wind on the day. Temperatures in London are also expected to be cooler. Spot prices could be supported for 14 March delivery as wind is anticipated to decline, offsetting lower demand.
- The UK day-ahead spot settled at £103.53/MWh from £96.10/MWh on the previous day.
- Wind output in the UK is forecast to drop to 5.63GW during base load on Thursday from 11.63GW on Wednesday according to SpotRenewables.
- Wind will then drop further to 3.59GW, or a 12% load factor on 14 March (Fri)– which could support costs.
- Mean temperatures in London have been mostly revised up over 12-17 March but will still be below the seasonal average until flipping above on 19 March. Average temperatures are seen climbing to as high as 10.3C over 20-21 March.
- Power demand in the UK is forecast to remain firm at 34.34GW on Thursday from 34.24GW on Friday according to Bloomberg. Demand will then drop 14 March to be at 33.73GW.
- Average temperatures are expected to drop to 3.83C tomorrow from 4.7C today.
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EGBS: Light Peripheral Outperformance vs Bunds This Morning
Light outperformance in 10-year peripheral bonds against Bunds, with European equity futures off Friday’s lows. The rally in European NatGas prices is likely helping to contain upside across core/semi-core EGBs this morning.
- The BTP/Bund spread is ~1bp tighter at ~108.5bps, after 106bps once again provided a floor to the spread last week. We look for a 2040 BTP to be launched via syndication in February, although with a decent risk of the transaction slipping into March.
- The OAT/Bund spread is a little tighter at ~71.5bps. However, medium-term political risks remain prevalent despite PM Bayrou surviving last week’s censure motions, after he forced the 2025 budget through the National Assembly using Article 49.3.
- Our Political Risk team highlighted last Friday that there is significant uncertainty surrounding the so-called 'spontaneous censure motion' that the PS intends to bring against the gov't this week. With the PS and presumably the rest of the leftist New Popular Front (NFP) alliance parties in favour, if the far-right RN backs the motion it would be enough to oust Bayrou.
OAT: Block trade
OAT Block trade, suggest buyer.
- OATH5 ~1.1k at 124.37.
US-EU: Commission-No Justificaton For Tariffs, Will React To Protect Interests
The European Commission has released a short statement following the announcement by US President Donald Trump of 25% tariffs on all aluminium and steel imports into the US. The Commission says that it has not yet received and official notification regarding the imposition of tariffs, adding that it will not respond to 'broad announcements' without additional detail. Nevertheless, the statement says: "The EU sees no justification for the imposition of tariffs on its exports. We will react to protect the interests of European businesses, workers and consumers from unjustified measures."
- Commission: "The imposition of tariffs would be unlawful and economically counterproductive, especially given the deeply integrated production chains the EU and US established through Transatlantic trade and investment."
- Commission: "Tariffs are essentially taxes. By imposing tariffs, the US would be taxing its own citizens, raising costs for business, and fuelling inflation. Moreover, tariffs heighten economic uncertainty and disrupt the efficiency and integration of global markets."
The EU and its member states will be bracing for further announcements on tariffs that Trump has trailed on 'Tuesday or Wednesday'. As the FT reported last week, the EU has the option of using its 'anti-coercion instrument', the so-called 'bazooka' to target US firms. This risks bringing services into the burgeoning trade spat, rather than just goods - a risky move some EU countries will be reluctant to back.
