POWER: Octopus Energy Backs UK Zonal Pricing but SSE Warns of Risks
Feb-27 10:46
Octopus Energy believes adopting zonal pricing could save UK consumers between £55-74bn by 2050. However, SSE warns that the approach may lead to regional price disparities, potentially raising costs for consumers in certain areas, according to both Firms.
- Zonal pricing could save consumers an average of £3.7bn per year, rising to £5bn annually if infrastructure delays occur, Octopus Energy said.
- This could reduce the need for additional power lines and pylons could generate further savings, making energy distribution more efficient, Octopus added.
- Additionally, the company calls for government action to implement zonal pricing, emphasising the opportunity to provide cheaper, fairer energy.
- And that adopting zonal pricing would protect consumers from future price shocks.
- However, SSE highlights that the risk of higher costs would be exacerbated by the increased financial uncertainty surrounding energy investments.
- SSE also argues that zonal pricing could add significant risk premiums to energy infrastructure projects, making them more expensive.
- Modelling by SSE suggests that zonal pricing could lead to up to £4bn in additional costs for upcoming offshore wind auctions.
- The firm emphasises the need to evolve the current pricing system without introducing unnecessary complications or risks to consumers.
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EGBS: BTPs and OATs Outperform Bunds On Improved Risk Backdrop
Jan-28 10:40
Bund futures are -10 ticks at 131.53, softening a touch as global equity futures continue to recover from yesterday’s lows. The improved risk backdrop sees BTP and OAT futures outperform Bunds.
- A corrective bull cycle remains in play in Bunds, with initial resistance still the 20-day EMA at 132.10.
- The German cash curve has lightly bear flattened. The new 2.20% Mar-27 Schatz was launched this morning, and digested smoothly.
- The ECB’s Q4 Bank Lending Survey signalled a tightening of credit standards and a lower demand balance amongst firms than seen in Q3.
- Austria is launching a new 10-year RAGB and tapping a 2049 Green RAGB via syndication today.
- Alongside Germany, the Netherlands and Italy also held conventional auctions this morning.
- The OAT/Bund spread is back below 73bps, with fiscal/political headline flow set to become more prominent again in the coming days/weeks.
- The remainder of today’s regional data calendar is light, leaving focus on any US tariff-related headline flow and the upcoming run of DM central banks later this week.
OUTLOOK: Price Signal Summary - S&P E-Minis Support Holds For Now
Jan-28 10:34
- In the equity space, the S&P E-Minis contract initially traded lower Monday extending the pullback from last Friday’s high. Key short-term support to watch lies at 5961.75, the Jan 16 low (pierced). For now, the move down appears corrective, however, a clear breach of 5961.75 would strengthen a bearish threat and signal scope for a deeper retracement, towards 5943.94, 61.8% retracement of the Jan 13 - 24 bull leg. Key resistance is 6178.75, the Dec 6 ‘24 high.
- A bull cycle in the EUROSTOXX 50 futures contract remains intact and the move lower from last Friday’s high, is considered corrective. A deeper retracement would allow an overbought trend condition to unwind. Moving average studies remain in a bull-mode set-up highlighting a dominant uptrend. The first important support to watch is 5097.39, the 20-day EMA. A resumption of the uptrend would open 5298.50, the 1.500 projection of the Nov 21 - Dec 9 - 20 price swing.
GERMAN AUCTION RESULTS: New 2.20% Mar-27 Schatz
Jan-28 10:32
| 2.20% Mar-27 Schatz* | Previous | |
| ISIN | DE000BU22080 | DE000BU22072 |
| Total sold | E5bln | E4.5bln |
| Allotted | E3.816bln | E3.472bln |
| Avg yield | 2.26% | 2.18% |
| Bid-to-offer | 2.15x | 1.81x |
| Bid-to-cover | 2.81x | 2.34x |
| Average Price | 99.873 | 99.652 |
| Low acc. Price | 99.870 | 99.650 |
| Pre-auction mid | 99.647 | |
| Previous date | 07-Jan-25 |
