EMISSIONS: EU Mid-Day Carbon Summary: EUAs/UKAs Track Weekly Gains
EUAs Dec25 are falling today, erasing most gains in the week and on track for a 0.18% weekly gain, pressured by EU equities and TTF drop today following the US imposing a 39% tariff on Switzerland, one of the steepest tariffs globally. Meanwhile, UKA Dec25 contracts are holding steady today versus broader market declines and are on track for a 1.22% weekly gain, as downward pressure from EUAs and UK equities is offset by short-term bullish sentiment that is limiting carbon losses, with the 10-day moving average rising above the 50-day for the first time since late June.
- EUA DEC 25 down 1.65% at 71.46 EUR/t CO2e
- UKA DEC 25 down 0.65% at 50.66 GBP/t CO2e
- TTF Gas SEP 25 down 1.7% at 34.665 EUR/MWh
- NBP Gas SEP 25 down 1.7% at 85.33 GBp/therm
- Estoxx 50 down 1.9% at 5219.7
- FTSE 100 SEP 25 down 0.5% at 9077
- The latest Germany ETS CAP3 auction cleared at €71.14/ton CO2e, up 1.31% compared with the previous Germany auction at €70.22/ton CO2e according to EEX.
- European stocks were tracking their biggest decline since April following the US announcing a 39% tariff on Switzerland, with STOXX down over 2% on the day.
- Global equities, including US, European and Asian indexes, declined on US tariff announcements, with rate of up to 41% for countries globally, and rate on Canada being raised from 25% to 35%.
- BNEF held a bearish view over EU ETS in August amid the expectation of falling allowances demand due to lower power demand across the bloc as temperatures cool slightly and improvement in renewables generation, it said.
- TTF front month has fallen from a peak of almost €35.5/MWh but remains set for a net weekly gain amid signs of increasing competition for LNG cargoes given various diversions away from Europe in recent days. Warm weather in August and threats of secondary tariffs/sanctions on Russia have added support.
- The European Financial Reporting Advisory Group’s (EFRAG) draft revision of the European Sustainability Reporting Standards (ESRS) risks undermining corporate accountability on EU climate goals, WWF warns.
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US TSYS: Early SOFR/Treasury Option Roundup: Tsy Puts
Option desks report mixed SOFR & Treasury option flow overnight, lighter volumes at the moment, Treasury options leaning toward low delta put structures with underlying futures continuing to retreat from Tuesday's highs. Projected rate cut pricing cools slightly vs. late Tuesday (*) levels: Jul'25 at -4.8bp (-5.3bp), Sep'25 at -28.1bp (-28bp), Oct'25 at -44.3bp (-44.8bp), Dec'25 at -63.5bp (-63.9bp).
- SOFR Options:
- +2,000 SFRQ5 96.00/96.18 call spds, 4.25 ref 95.98
- +2,000 SFRN5 95.87/95.93 3x2 put spd, 2.75 ref 95.98
- +8,000 SFRZ5 95.75/95.87/96.25/96.37 put condors, 6.0 vs. 96.225/0.05
- +2,000 SFRU5 96.12/96.25/96.37 call flys, 1.5 ref 95.975
- Block/screen -5,000 SFRU5 96.00/96.31 call spds, 6.0 ref 95.975
- Treasury Options:
- 1,800 TYQ5 111.5/112.5 call spds, 25 ref 111-21
- +1,500 110/111 2x1 put spds, 8 vs. 111-18.5/0.05%
- 3,000 TUQ5 103.25/103.5/103.62/103.75 broken put condors ref 103-27.88
- over 7,700 TYQ5 110 puts, ref 111-22.5
- over 6,700 TYQ5 110.5 puts, ref 111-21
- +2,000 FVQ5 109/109.75 1x2 call spds, 4 vs 108-22.75/0.08%
- +2,500 TYU5 109/110/111 put trees, 9 vs. 111-17/0.03%
FRANCE: Bayrou Survives Censure Motion But No Smooth Future For Minority Gov't
As was widely expected, PM Francois Bayrou comfortably survived a censure motion in the National Assembly on the evening of 1 July. The centre-left Socialist Party (PS) brought the motion after a breakdown in 'conclave' talks involving the gov't, the PS, trade unions and employers' organisations on the 2023 pension reforms resulted in the PS saying it has lost faith in the Bayrou gov't.
- The PM's saving grace proved to be the far-right Rassemblement National (National Rally, RN), which declined to back the motion, claiming that the timing was not right, and instead raising the prospect that negotiations over the 2026 budget could spark their own censure motion. RN leader in the National Assembly Marine Le Pen said "What is the benefit for the French? Zero. The left is making people believe that if we vote for the motion we will return to the old legal retirement age. That is a lie. We are not lying to the French: this censure brings nothing."
- In the event, 189 of the 577 deputies backed the motion, well short of the 289 required for an overall majority. In the event, almost all assembly members from the left-wing New Popular Front (NFP) alliance voted in favour of censure, as well as three lawmakers from the Liberties, Independents, Overseas and Territories (LIOT) group.
- Data from Polymarket shows bettors assigning a 43% implied probability that Bayrou is out as PM in 2025, up from 36% on 17 June, but down from a peak of 80% on 26 March.
- The budget process in the autumn is likely to see more concerted efforts to remove Bayrou and force a snap election.
Chart 1. 1 July Censure Motion Vote (In Favour)
Source: Le Monde, MNI
GILTS: ING Note Risk Of Further Curve Steepening On Global Impulses
in light of yesterday’s comments from BoE Governor Bailey ING note that a “slowing of QT would be purely to reduce the interest rate risk in the market, as liquidity conditions seem to hold. Both the short- and long-term repo facilities have started adding reserves to the system, thereby mitigating the risk of a liquidity crunch. As such, reducing the unwind of the bond portfolio would be aimed more at containing the term premium”.
- Having said that, they think the upward pressure on long end gilt yields can remain for now due to global factors (they see risks of higher long end yields in the U.S., Eurozone & Japan on fiscal worries).
