EMISSIONS: EU End-Of-Day Carbon Summary: Carbon Rises, Record High Correlation
May-09 15:09
EUAs/UKAs Dec25 are up nearly 3% and nearly 4% respectively on the week, tracking gains in EU gas and equities. Meanwhile, EUA-UKA are tightening 30-day correlation to the highest level since April 2024 ahead of EU-UK Summit on 19 May.
- EUA DEC 25 down 0.47% at 70.39 EUR/t CO2e
- UKA DEC 25 down 0.71% at 51.4 GBP/t CO2e
- TTF Gas JUN 25 down 2.1% at 34.6 EUR/MWh
- NBP Gas JUN 25 down 2.5% at 82.71 GBp/therm
- Estoxx 50 up 0.5% at 5291
- Correlation between EUA/TTF for 30-day period at 0.58.
- Correlation between EUA/STOXX for 30-day period at 0.50.
- Correlation between EUA/UKA for 30-day period at 0.77.
- Correlation between UKA/FTSE100 for 30-day period at 0.58.
- The EUA Dec25 premium to the UK equivalent remained at a similar level at €9.73/t CO2e.
- The latest Germany ETS CAP3 auction cleared at €70.2/ton CO2e, up 6.54% compared with the previous Germany auction at €65.89/ton CO2e according to EEX.
- EUA Auction Calendar Week Ahead (Calendar Week 20) - A total of 13.4mn EUAs will be auctioned next week, with a full 5-day auction week, the highest weekly volume since the week ending 4 April, due to holidays in the past few weeks.
- EUA Dec25 implied volatility as of 8 May fell to its lowest level since early April, as tariff tensions eased and carbon prices rose steadily during the period. EUAs Dec25 are tracking nearly 3% in weekly gains, while EU gas is up 6%.
- UKAs nearest-December futures contract open interest hit an all-time high on 7 May at near 53k contracts, with participation rising ahead of EU-UK Summit on 19 May as investors eyeing on EU-UK ETS linkage progress.
- The World Cement Association (WCA) has expressed support for UK-EU ETS linkage, calling for consistent pricing and investment certainty, it said.
- Major European airlines are increasing carbon hedging and applying surcharges to customers to manage rising ETS exposure, according to Bloomberg.
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EGB OPTIONS: Bund Call Spread Buyer
Apr-09 15:05
RXK5 132/133 call spread, bought for 25 in 12k
BOE: Will the BOE intervene in the gilt market?
Apr-09 15:02
- 30-year gilt yields hit their highest levels since 1998 today and 2s30s steepened around 65bp between President Trump announcing tariffs and their peak today (albeit at the time of writing 2s30s was around 12bp off of its intraday extreme).
- These moves are more extreme than those seen in Germany or the US and this brings the inevitable question of whether the Bank of England will look to provide liquidity to the market or pause QT.
- We think we are still some way away from this.
- First, despite the moves having been larger in gilts than in Bunds or USTs, we still had a 30-year gilt auction yesterday that was well received. This will have given the BOE comfort (and indeed gilt futures rallied around 25 ticks on the results publication).
- Second, the Bank of England notes that the LDI crisis in 2022 was not a solvency issue, or even an excessive LDI leverage issue. There was an issue with the segmentation between the balance sheet of the LDI and the pension fund - and the Bank notes that these balance sheets are now better integrated.
- There are also a number of tools available to provide liquidity in times of crisis - they are more likely to be used than the BOE stepping into the market and outright purchasing gilts.
- On the subject of pausing QT, we see little reason for this at least until the September decision. In the short term, there are only two more operations this quarter (one of which is for long-dated gilts next Monday which will be an interesting litmus test for the market). And then there is large passive rolloff in June - but that is some time away and market conditions could look very different in eight weeks time!
- The bar is very high for the BOE to change the current APF sales schedule based on their previous communications. The pace from October (to be determined at the September meeting) is very uncertain at this stage, however.
TARIFFS: Greer Says Trump Admin Is "Open To Negotiating With Willing Partners"
Apr-09 14:57
United States Trade Representative Greer has stated, in testimony to the House Ways and Means Committee, that President Donald Trump is “open to negotiate with countries that actually want to pursue reciprocal trade.” LIVESTREAM
- Greer notes that he spoke with counterparts from the EU, Canada, and Mexico yesterday. Says there is an “opportunity” for countries to “bring down their tariffs.”
- Greer adds later: "The President has directed that we're negotiating with willing partners, and that's where I get my guidance from."
- Greer notes, "there are no exceptions or exclusions" to the tariff programme, suggesting that the Trump administration sees bilateral trade deals as the primary route to tariff relief.
- Greer says he has had frequent meetings and conversations with his UK counterparts on "how to move the economic relationship forward". He says that he has expressed his concerns with UK barriers to US agricultural imports, noting that is “very important to us.”
- The hearing is ongoing and could last around four hours, if yesterday’s corresponding Senate hearing is a guide.
