EMISSIONS: Germany’s Policy Shift Could Raise EUAs Demand
{Germany’s newly agreed coalition government could increase emissions and raise demand for EUAs, with its agenda on economics and policies on gas and coal plants, according to the latest BNEF report.
- The government’s top agenda to boost economic competitiveness and strengthen national security could see higher power emissions as coal and gas are favoured for longer.
- Germany approved an extension for gas plants to 2030 in January.
- The coalition remains committed to the original coal phase-out deadline of 2038, despite the previous government’s effort to bring it forward to 2030.
- In 2024, over 30% of German power was still generated from fossil fuels, a share that could inflate demand for EUAs demand.
- However, in a longer term, by 2038, the current phase-out plan for coal and full replacement with gas would still reduce emissions by up 20mn tonnes CO2e, equivalent to almost €3bn in carbon costs based on BNEF’s forecast carbon price.
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US 10YR FUTURE TECHS: (M5) Support Remains Intact
- RES 4: 113-02 2.0% 10-dma envelope
- RES 3: 112-13 1.500 proj of the Jan 13 - Feb 7 - Feb 12 price swing
- RES 2: 112-01/02 High Mar 4 / 1.382 proj of Jan 13-Feb 7-12 swing
- RES 1: 111-25 High Mar 11
- PRICE: 110-20+ @ 10:27 GMT Mar 18
- SUP 1: 110-14+ 20-day EMA
- SUP 2: 110-12+/00 Low Mar 6 & 13 / High Feb 7 and 50-day EMA
- SUP 3: 109-13+ Low Feb 24
- SUP 4: 108-21 Low Feb 19
The trend condition in Treasury futures is unchanged, a bull cycle remains in play and the current consolidation marks a pause in the uptrend. A bull theme is reinforced by MA studies that are in a bull-mode condition, highlighting a dominant uptrend. Recent gains have resulted in a print above 111-22+, the Dec 3 ‘24 high. A clear breach of this level would open 112-02 and 112-13, Fibonacci projections. Firm support is 110-00, the Feb 7 high.
CROSS ASSET: Equities Off Highs & Bonds Off Lows
Bonds tick away from lows and equities edge away from highs in recent trade.
- The downtick in equities started a little before the disappointing ZEW current situation reading (which was accompanied by a slightly larger-than-expected jump in the expectations component, driven by the German fiscal sea change).
- A continued rally in oil limits the recovery.
- BBG source reports/headlines surrounding Russian demands re: a Ukrainian ceasefire aren’t particularly surprising/market moving.
EGBS: Bund ratio put fly
RXJ5 127/126.5/125.5p fly 1x2x0.5, bought for -1 in 4k.
