EMISSIONS: International Carbon Credits May Undermine EU ETS
{EU}{Allowing international carbon credits into the EU ETS would risk undermine decarbonisation effort and derailing the bloc’s 2040 climate target, according to the Oeko Institute.
- Introducing Article 6 credits would potentially let polluters bypass emissions reduction action, in conflict with the EU Climate Law.
- Both the Linear Reduction Factor and the Market Stability Reserve are performing effectively and require no adjustments before 2035. Undermining either mechanism would risk oversupply, depressed carbon prices, and slowed decarbonisation.
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CROSS ASSET: Bund Block trade, US 10yr Yield tests 4.50%
Bund block trade, suggest seller
- RXM5 3.23k at 129.51.
Worth keeping an eye on the US Tnotes (TYM5), while Yesterday's low is at 109.30, the 4.50% Yield is circa 109.28+, now at 4.496%.
The Yen is unaffected still, but further breakout lower in TYM5 might provide some demand in USDJPY.
CANADA DATA: Canada Mar Building Permits Fall But Q1 Shows 5th Straight Increase
- March building permits -4.1% to CAD12.9B, StatsCan says Wed.
- Decline driven by non-residential sector -15% to CAD4.2B mainly due to a significant drop in commercial with Ontario posting more than half the decrease.
- Residential permits +2% to CAD8.7B on multi-family units, while single-family units -5.3%.
- Permits +15% YOY.
- On a quarterly basis, building permits +2.9% to CAD39.1B, fifth straight gain. Multi-family housing +9.6% to record high CAD17.3 billion, led by Vancouver projects.
GERMANY: Merz' Government Declaration Overall Close To Coalition Agreement
Chancellor Merz concluded his inaugural government declaration, overall remaining close to his CDU/CSU/SPD coalition agreement. Generally, he highlighted making competitiveness a key parameter in economic policy, preserving jobs in industrial manufacturing, and budget consolidation (increasing efficiency of measures) as key goals for his administration. Concrete measures announced include the below:
- Accelerated depreciation on private investment: 30% of acquisition costs deductible per year over 3 years, starting to reduce enterprise taxes in 2028
- Imposition of a 12-year infrastructure package
- New free trade initiative proposed in the EU (mentioning MERCOSUR, US)
- Enabling enterprise formation within 24 hours
- Reduction of reporting obligations for enterprises
- Introduction of an 'early start-retirement pension' (Frühstartrente; from 2026, children from age 6 receive E10/month in an individual, publically funded and privately managed retirement savings account. Fiscal costs costs would amount to ca. E1bln/year)
- CO2 pricing as a core component of climate policy, revenues should not flow into the budget but be distributed Sticking to European climate targets
- Maximum weekly working hours instead of daily maximum to increase labour flexibility
- Government believes the E15/h minimum wage by 2026 is achievable and desirable, but will not enshrine the goal in law - minimum wage commission remains in place
- "Trusting" the agricultural sector: Relying on voluntary action and personal responsibility of farms (this announcement saw a positive reaction in German chemical equities)
- Prioritizing integrating immigrants into the labor market as quickly as possible
- More collective bargaining in the labour market
- Intensify cooperation with Asian partners (mentioning China, some other APAC countries)
- Deepening cooperation with UK on defence
Next in the German domestic politics calendar will be finance minister's announcement of updated tax estimates tomorrow - Handelsblatt sources flagged this will result in a downward revision following lower GDP forecasts ('GERMANY: German Tax Revenue Estimates To Be Downwardly Revised - HB' - May 13).
