POWER: EU Mid-Day Power Summary: CWE Jan Power Slides to Over One-Month Low
Dec-12 12:05
France January power is trading at the lowest since 1 November, while Germany January has briefly hit the lowest since 7 November, before recovering, due to forecasts for mild, windy weather and a pullback in the wider energy complex. Nordic January power is tracking a new contract low weighed on by mild weather and losses in EU gas.
- Nordic Base Power JAN 25 down 1% at 50.15 EUR/MWh
- France Base Power JAN 25 down 2.9% at 90.08 EUR/MWh
- Germany Base Power JAN 25 down 3.5% at 105.5 EUR/MWh
- EUA DEC 24 down 1.4% at 67.68 EUR/MT
- TTF Gas JAN 25 down 3% at 43.36 EUR/MWh
- TTF front month falls to the lowest since Nov. 13 as warmer and windier weather next week is expected to limit gas demand while small Norwegian supply outages are easing.
- EU ETS December 2024 has extended losses through the morning with downside from EU gas prices.
- The latest EU ETS CAP3 auction cleared higher at €67.95/ton CO2e, compared with €67/ton CO2e in the previous auction, while narrowing the discount to the futures contract.
- RWE’s 1.05GW Neurath F lignite-fired power plant in Germany will be offline for two days from 12 December 19:00CET.
- UK ministers are eying to introduce the country’s biggest ever renewable energy subsidy auction in 2025, the FT reported.
- Norway’s two governing bodies are proposing to abandon the power interconnector with Denmark as well as renegotiating connections to the UK and Germany amid high domestic power prices, the coalition said, cited by FT.
- Danish TSO Energinet anticipates that situations of “Dunkelflaute” will not immediately occur more often in the coming years but will be more “noticeable for the electricity system when it occurs”.
- Enefit said on Wednesday it has submitted the environmental impact assessment report for its planned 1GW Liivi Bay offshore wind project in the Gulf of Riga in Estonia, to the Technical Regulatory Authority.
- French Financial entities Bpifrance Assurance Export and Sfil are interested in funding Poland’s first nuclear power plant in the Pomeranian region, with the firms offering PLN15bn (€3.50bn).
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PIPELINE: US$ Corporate Debt Issuance Returns
Nov-12 12:00
Corporate issuance resumes as the latest earnings cycle winds down (not to mention the backlog of sidelined parties due to the FOMC and Presidential Election). Issuance estimated at appr $35B for the week.
- Date $MM Issuer (Priced *, Launch #)
- 11/12 $Benchmark HSBC 4NC3 fix/SOFR, 6NC5 fix/SOFR, 11NC10 +175a
- 11/12 $Benchmark Republic of South Africa 12Y 7.4%a, 30Y 8.25%a
- 11/12 $Benchmark People's Republic of China 3Y, 5Y estimated at up to $2B between the two tranches, Bbg reported the sale will take place in Riyadh as China looks to deepen financial ties with Saudi Arabia. A long list of bookrunners includes: BOC, BKCOMM, Agricultural Bank of China, BofA, CCB, CICC, C, CA-CIB, DB, FAB, GS, HSBC, ICBC, JPM, Mizuho, StanChart
GERMANY: 16 Dec Date For Confidence Vote In Bundestag
Nov-12 11:56
Following earlier reports that 23 February 2025 is the most likely date for a snap federal election, it now appears that the confidence vote required to set in motion the removal of the gov't and the calling of snap elections will take place on Monday 16 December.
- Under Germany's 'Basic Law', it is the gov't that must call a confidence vote in itself to trigger the dissolution of the Bundestag and snap elections. The opposition can only call a 'constructive confidence vote', which requires their own chancellor candidate to be able to command a majority in the chamber in order to oust the incumbent.
- The Social Democrat-Green minority gov't of Chancellor Olaf Scholz will fall considerably short of a majority (see chart below), meaning President Frank-Walter Steinmeier can dissolve the Bundestag within 21 days. Freidrich Merz, leader of the conservative Christian Democratic Union (CDU) would likely only be able to rely on the support of his allies in Bavaria's Christian Social Union (CSU) and the Free Democrats (formerly part of the governing coalition) thereby falling well short of the majority required to oust Scholz on the opposition's terms.
Chart 1. Bundestag, Seats
Source: bundestag.de, MNI
EURUSD: Parity Risks Loom Large in '25
Nov-12 11:41
- EUR/USD's fresh pullback low at 1.0611 today equates to a near 3% sell-off since the election results last week and a >5% downleg off the YTD high at 1.1214. This keeps alive the speculation that EUR/USD could hit parity under an adverse trade war scenario or a particularly hawkish turn from the Fed.
- While markets see little likelihood of EUR/USD testing that mark in the near-term, but the risk picks up materially thereafter.
- Just $650mln notional has traded in EUR/USD vanilla put options with a strike at 1.00 or below since November 1st on the DTCC - a relatively meagre % of the $300bln market this month. This providies little concrete evidence of the market's focus on parity just yet - reflected in premiums pricing just a 2.3% chance of payoff for a EUR/USD 1.00 one-touch option expiring on Dec31 this year.
- We wrote last week that speculation of parity is building, however. The risk becomes much more apparent further down the curve and into the Trump admin's first few months. Compounding this effect, the implied Fed-ECB rate differential has grown considerably for Jun'25, from ~40bps to ~130bps in six weeks.
- As a result, markets now price a 24% chance of touching parity by end-Jun'25, up from 9.6% ahead of the election/German government breakdown.
