EMISSIONS: EU End-Of-Day Carbon Summary: EUAs/UKAs Traded Sideways
EUAs/UKAs Dec25 are trading sideways with market yet to find catalysts for price breakouts as the fundamentals remained unchanged. Meanwhile, the EUAs-TTF correlation has further loosened to the weakest level since Sep 2023.
- EUA DEC 25 down 0.04% at 73.24 EUR/t CO2e
- UKA DEC 25 up 0.73% at 51.16 GBP/t CO2e
- TTF Gas JUL 25 down 12.4% at 35.505 EUR/MWh
- NBP Gas JUL 25 down 13.5% at 82.6 GBp/therm
- Estoxx 50 up 1% at 5249.52
- Correlation between EUA/TTF for 30-day period loosened to 0.25.
- Correlation between EUA/STOXX for 30-day period remained at 0.18.
- Correlation between EUA/UKA for 30-day period remained at 0.40.
- Correlation between UKA/FTSE100 for 30-day period remained at 0.31.
- The EUA Dec25 premium to the UK equivalent remained at a similar level at €13.3/t CO2e.
- A bull cycle in ICE EUA futures remains intact and the latest pullback still appears corrective. Recent gains signal scope for an extension towards €78.73, a Fibonacci retracement point. Clearance of this level would strengthen a bullish condition. Moving average studies are in a bull-mode position, highlighting a clear uptrend. Initial support to watch is €71.87 the 50-day EMA. A clear break of it would undermine the bull theme.
- TTF front month has fallen sharply after a ceasefire agreement between Iran and Israel, though allegations that the ceasefire has been broken today has added uncertainty. Nevertheless, the risk premium is unwinding due to much reduced risk to global LNG supplies.
- The latest EU ETS CAP3 auction cleared at €72.91/ton CO2e, up 1.26% compared with the previous EU auction at €72/ton CO2e according to EEX.
- Veyt forecasted that EUAs will likely oscillate between €70-75/t ahead of the June options expiry on Wednesday this week, with limiting influence from fundamentals to carbon.
- In the joint statement from the EU-Canada Summit on 23 June, it mentioned that the EU-UK will cooperate on carbon pricing systems and carbon border measures, although no further information was provided.
- Over 20 trade associations, businesses and NOGs called for the municipal waste incineration installations and landfills to be included in the EU ETS from 2028, it said
- EUAs' Dec25 10-day historical volatility has been below TTF's since late May and declined below STOXX volatility for the first time since early April, with carbon being less sensitive toward recent heightened geopolitical risks due to mixed market sentiments within the carbon market that balanced out potential unilateral direction.
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JGB TECHS: (M5) Rallies off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.40 @ 15:42 GMT May 23
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows and for now, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US FISCAL: Total Tariff Income Jumping In May As New Rates Hit
Treasury reported a record $16.5B in customs/excise taxes on May 22, reflecting the large increase in tariff rates that went into effect in April.
- Today's report is important because it represents the largest tariff collections of the month which are typically on a due date around the 22nd, when most corporate importers make their payments.
- Thursday's one-day collection is a record, and the month has already set a new record. Tariff revenues have totaled $22.3B so far in May, and are came in at $17.4B in April (after averaging $8.1B/month in 2024).
- For the fiscal year as a whole so far, customs duties have totaled just under $93B, per the Treasury Daily Statement.
US FISCAL: Extraordinary Measures Continue To Dissipate Alongside Treasury Cash
Treasury's latest estimate of the size of "extraordinary measures" available to use "in order to prevent the United States from defaulting on its obligations as Congress deliberate[s] on increasing the debt limit" is down to $67B on May 21 (of an available $299B), vs $82B a week earlier.
- The amount hit the 2nd lowest level since the debt limit impasse started, at $46B, on May 20 (the low was $34B on Feb 24).
- With $476B in cash in the Treasury General Account on May 21, that left the total resources available to Treasury at $543B, the least since April 14 - the day before the annual April 15 tax deadline.
- Treasury Sec Bessent warned Congress earlier this month that "there is a reasonable probability that the federal government's cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess. Therefore, I respectfully urge Congress to increase or suspend the debt limit by mid-July".
