POWER: Poland's Front Month Drops On Coal, Temps and EU ETS Limit Decline
Dec-09 14:09
Poland’s January edged down from the previous session as losses in European coal offset gains in EU ETS and a downward revision of average temperatures in Warsaw – which is likely to drive up heating demand.
- Poland’s January baseload power settled at PLN491.63/MWh compared to its settled price of PLN493.43/MWh on 8 December, according to data on Polish power exchange TGE.
- EUA DEC 25 up 0.1% at 82.10 EUR/MT
- Rotterdam Coal Jan 26 down 0.3% at 97.10 USD/MT
- Liquidity for the contract edged up from the previous session, with 29 lots done in 24 sessions compared to 28 lots in the previous session.
- EUAs Dec25 are rising ahead of options expiry tomorrow, supported by gains in EU gas.
- Mean temperatures in Warsaw were revised lower over 1-22 January, with temperatures seen dipping below the seasonal norm over 1-10 January before returning above for most of the remainder of the period. Temperatures will be negative throughout the 1-22 January.
- The 630MW Plock power plant will still be disconnected over 9-24 January. However, works at other key power plants will be limited over the month, keeping supply firm.
- Closer in, average temperatures in Warsaw were mostly revised higher over 10-14 December by as much as 2C. Temperatures are expected to be above the seasonal norm throughout the 14-day ECMWF forecast.
- The 910MW Jaworzno 2 power plant unplanned 230MW curtailment has bene extended to 20 December from10 January before fully returning to the grid the next day, latest Remit data show.
- The 670MW unit 9 at the 1.34GW Gryfino power plant will still be offline until 9 December.
- The 1.83GW Turow power plant will also almost fully return to the grid on 11 December, after being more than halved amid curtailments are most of its units.
- The day-ahead dropped to PLN467.68/MWh for Wednesday delivery from PLN510.74/MWh for Tuesday amid price falls in nieghbouring Germany, despite wind expected at 26% load factor tomorrow compared to 47% today.
- Looking ahead, wind is anticipated to be at a 4.50GW, or a 48% load factor on 11 December (Thu) – which could weigh on costs.
- Separately, the EC has approved public aid for Poland’s first 3.7GW nuclear power plant, enabling PEJ to finalise contracts with Westinghouse and Bechtel, with total support estimated at over PLN60bn (€14bn).
- Additionally, Poland’s Energy Regulatory Office has updated the country’s first offshore wind auction, ahead of the bidding session scheduled for 17 December 2025.
- over 08:00-18:00CET.
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FED: Fed Assets Pull Back, But Reserve Management Buys Eyed In 2026 (2/2)
Nov-07 21:58
Indeed NY's Williams has already begun pointing to potential for balance sheet re-expansion to begin again, with "reserve management" purchases intended to keep Fed liabilities rising in line with market demand:
- "Looking forward, the next step in our balance sheet strategy will be to assess when the level of reserves has reached ample. It will then be time to begin the process of gradual purchases of assets that will maintain an ample level of reserves as the Fed’s other liabilities grow and underlying demand for reserves increases over time. Such reserve management purchases will represent the natural next stage of the implementation of the FOMC’s ample reserves strategy and in no way represent a change in the underlying stance of monetary policy."
- The prevailing consensus is that such reserve management purchases will begin by the end of Q1 2026 if not earlier, with t-bills bought and in amounts of up to $20B a month.
- Meanwhile in the final countdown to the end of QT on December 1, net SOMA runoff was around $4B in the last week, with a pace of around $20B overall over the last month.
- Takeup of the Fed's lending facilities pulled back in the week to Wednesday Nov 5, halving to just over $11B as month-end pressures abated. This was due almost entirely to a $10.2B drop in dealer repo operation takeup, the spike in which last week marked the highest since 2020.
FED: Reserves Tick Up Slightly In Latest Week, But Still Near "Ample" (1/2)
Nov-07 21:53
The Fed's latest H.4.1 release on Nov 5 showed reserves picked up from the prior week's post-2020 lows to $2.85T, up $24B in the latest week but still down $182B over the last month.
- This of course has been the mirror image of movements in the Treasury General Account which briefly touched $1T though settled Wednesday at $943B (a fall of $41B on the week, but a rise of $149B in a month).
- Treasury indicated this week that it maintained its $850B quarter-end cash target, with the recent buildup due in part to the federal government shutdown slowing outflows but also a typical cautionary cash rase ahead of large seasonal expenditures.
- The Fed's reverse repo facilities remained in relatively negligible territory albeit with a slight pickup at month-end October.
- Overall the Fed has recognized that it may be getting close to the transition point between once-"abundant" and now merely "ample" reserves, hence October's decision to end net asset runoff as of Dec 1.
- NY Fed President Williams said Friday morning “Based on recent sustained repo market pressures and other growing signs of reserves moving from abundant to ample, I expect that it will not be long before we reach ample reserves."
FED: Financial Stability Report Eyes Term Premia And "Opaque" Financing Risks
Nov-07 21:31
A few highlights from the Fed's latest Financial Stability report out today (link):
- In terms of asset valuations, "Prices remained high relative to their historical relationship with fundamentals across a range of markets."
- The report highlights high leverage in the financial sector: "Vulnerabilities associated with financial leverage remained notable. Over the past few years, hedge funds’ leverage has steadily increased across a broad range of strategies, including those involving Treasury securities, interest rate derivatives, and equities"
- However "Vulnerabilities from business and household debt remained moderate" and "The banking sector remained sound and resilient overall, and most banks continued to report capital levels well above regulatory requirements."
- In terms of future risks, "A further increase in term premiums leading to higher-than-anticipated long-term interest rates, particularly if accompanied by
persistent inflation, could pose risks for both borrowers and lenders" - And the Fed has its eye on "opaque off-balance-sheet funding arrangements" re the recent voliatility caused by First Brands and Tricolor: "The recent bankruptcies of two privately held firms, an auto parts supplier and a subprime auto lender, so far appear to be isolated events. However, these examples highlight that unexpected losses could arise from opaque off-balance-sheet funding arrangements that may be used by certain privately held firms."
