EMISSIONS: EU Mid-Day Carbon Summary: EUAs/UKAs Track Weekly Gains
EUAs Dec25 are on track for a weekly gain of 0.06% supported by EU and UK equities gains, while TTF losses are limiting carbon gains despite weakened correlation. EUAs are edging higher on the day, while some gains were erased following TTF near 2% intraday downtick. UKAs Dec25 are set for a weekly gain of 4.21%, supported by buying interest following potential EU-UK ETS link progress leaked during the week, while some gains were erased today as EUAs intraday losses weigh on UKAs.
- EUA DEC 25 up 0.06% at 70.59 EUR/t CO2e
- UKA DEC 25 down 2.88% at 49.51 GBP/t CO2e
- TTF Gas AUG 25 down 0.4% at 34.27 EUR/MWh
- NBP Gas AUG 25 down 0.5% at 81.71 GBp/therm
- Estoxx 50 down 0.1% at 5373.06
- FTSE 100 SEP 25 down 0.1% at 8971.5
- The latest Germany ETS CAP3 auction cleared at €69.68/ton CO2e, up 0.55% compared with the previous Germany auction at €69.3/ton CO2e according to EEX.
- TTF front month has moved toward the low end of the ~€34-35.5/MWh trading range seen since Tuesday on lower forecasted temperatures and higher Norwegian flows today.
- The EU Commission has unveiled its budget proposal for the 2028-2034 period, which includes plans to incorporate revenues from the EU ETS and CBAM into the bloc’s budget, it said.
- INEOS has achieved a 75% reduction in emissions at its Hull manufacturing site following the completion of a £30mn hydrogen conversion project, it said.
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OUTLOOK: Price Signal Summary - Bund Trend Structure Still Bullish
- In the FI space, Bund futures are unchanged and the contract continues to trade below last Friday’s high. For now, the latest move down is considered corrective and key short-term support to watch lies at 130.12, the Jun 5 low. A break of this level would highlight a stronger reversal and undermine the bullish theme. Key short-term resistance and the bull trigger, has been defined at 131.95, the Jun 13 high.
- A bullish condition in Gilt futures remains intact and last Friday’s steep sell-off from the session high is - for now - considered corrective. The move higher last week marks an extension of the recent breach of resistance at 91.87, the May 20 high. This signals scope for a test of 93.73, a 1.764 projection of the May 22 - 27 - 29 price swing. Note the uptrend is in overbought territory, a deeper pullback would unwind this position. Initial firm support lies at 92.17, the 20-day EMA.
US DATA: Mortgage Spreads Retrace Half Of Tariff-Driven Widening
- MBA composite mortgage applications fell -2.6% (sa) last week for only a modest pullback from a strong 12.5% increase the week prior.
- The lack of reaction to a 9bp decline in the 30Y conforming mortgage rate wasn’t too surprising considering the outsized strength of that prior increase on a 1bp increase previously.
- New purchase applications led the decline (-3.0% after 10.3%) although refis saw a broadly similar pattern (-2.1% after 15.6%).
- Composite applications are at 52.5% of 2019 levels, with new purchases at 64% and refis at 40%.
- The 9bp decline in the 30Y mortgage rate came despite no change in the average 10Y swap rate over the week.
- That saw the mortgage-swap rate narrow to 294bps for its tightest since late March having widened to 315bp in early May (widest since Feb 2024) in fallout from trade policy. It’s still above the 285bp averaged through Q1 before the reciprocal tariff announcements of Apr 2.
ECB: Centeno Sticks To Dovish Script
Headlines crossing from Bank of Portugal Governor Centeno:
- " ECB'S CENTENO:VERY WORRIED ABOUT GROWTH IN EUROPE, WITH GROWTH NOT COMING INFLATION WON’T BE AT 2%" - Reuters
Nothing too surprising from one of the Governing Council's most dovish members. On June 6, Centeno noted that "Monetary policy is in a cycle of reducing rates” ...“all data indicates that cycle will continue in 2025. We don’t know at what pace. It’s meeting by meeting, depending on the data.”
