EMISSIONS: EU End Of Day Carbon Summary: EUAs/UKAs Rise To One-Week High
Apr-10 15:32
EUAs/UKAs Dec25 are both rising to one-week high amid the rebound in equity markets following the US tariff reprieve, while correlation between both markets tightened to a three-week high.
- EUA DEC 25 up 2.2% at 62.26 EUR/MT
- ICE UKA Dec25 up 6.1% at 43.7 GBP/MT
- TTF Gas MAY 25 down 0.9% at 33.35 EUR/MWh
- Correlation between EUA/TTF for 30-day period remained high at 0.65.
- Correlation between EUA/UKA for 30-day period remained high at 0.68.
- The EUA Dec25 premium to the UK equivalent narrowed to €11.8/t CO2e from the €13.2/t CO2e in the previous day, amid UKAs rally.
- The latest EU ETS CAP3 auction cleared at €62.08/ton CO2e, up 2.87% compared with the previous EU auction at €60.35/ton CO2e according to EEX.
- The latest EU ETS CAP3 auction cleared at €62.08/ton CO2e, up 2.87% compared with the previous EU auction at €60.35/ton CO2e according to EEX.
- A total of 11.8mn EUAs will be auctioned next week ahead of the Easter holiday, with volume down 12% compared to a normal week with five auctions. Meanwhile, the eighth UK ETS auction of the year will be held next week, with a total of 2.2 million UKAs to be auctioned.
- The US has withdrawn from UN-led maritime climate negotiations, citing that proposed carbon levies levy could harm US-flagged vessels and trade competitiveness, according to Reuters.
- AI Data centres are set to grow both in energy use and emissions by 2030, with indirect emissions projected to rise nearly 80%, according to IEA latest note.
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GILT AUCTION PREVIEW: On offer next week
Mar-11 15:31
The DMO has announced it will be looking to sell GBP4.25bln of the 4.375% Mar-28 Gilt (ISIN: GB00BSQNRC93) at its auction next Tuesday, March 18.
US: SFR Call spread
Mar-11 15:24
SFRM5 95.75/96.00cs 1x2, bought for -4 and -3.75 in 4k.
BONDS: FX-Hedged Yields Remain Unattractive For Japanese Across Most Markets
Mar-11 15:17
In trend terms, Japanese investors continue to favour the safe haven status of U.S. Tsys and are willing to buy gilts on pullbacks, while they remain more cautious on EGBs.
- Across U.S. Tsys, the major EGBs and gilts, only BTPs offer a pickup vs. 10-Year JGB yields when rolling 3-month FX hedge costs are accounted for, although the gaps have narrowed in recent months.
- Japanese participants are relatively small players in the BTP market, with Japan’s monthly BoP data pointing to cumulative net selling of Italian paper in the 12 months through January.
- 10-Year OATs generate a small FX-hedged yield stepdown vs. 10-Year JGBs, which, when coupled with a political and fiscal uncertainty premium, may not make for an enticing investment offering for Japanese investors. Accordingly, BoP data shows Japan as net sellers of French bonds in 10 of the last 11 months.
- Japan is also a net seller of German paper over the last 12 months. The desire for looser fiscal policy in Germany is unlikely to reverse that trend in the short-term, although a further step up in yields could help entice Japanese participants when the German fiscal outlook becomes clearer.
- U.S. & UK bonds continue to benefit from Japanese inflows, with only fairly isolated rounds of monthly sales visible when going back over the last 12 months.
- Not all of these flows will necessarily be FX-hedged, given the stepdown in yields that hedging typically generates vs. JGBs.
Fig. 1: FX-Hedged Yields From The Perspective Of A Japanese Investor
Source: MNI - Market News/Bloomberg
