The government is in talks with the country’s second-biggest coal miner LEAG to end production by 2030, eight years earlier than planned, despite protests by some of its 7,000 employees. Three years ago, it promised LEAG €1.75 billion to get out of coal by 2038. It reached an agreement in October with the largest utility RWE AG to exit coal in 2030.

The EU will make it harder to get public contracts and subsidies for those using imports from China. The EU wants to “de-risk” its exposure to China, which supplies most solar panels and is increasing its share in wind turbines and electric vehicles. The EU also wants to increase domestic mining of lithium and other minerals used in green technology.

Silicon Valley Bank had $209 bln in assets. Its tech-focused clients were hit by a cash squeeze and pulled money from their accounts. To cover the withdrawals, SVB sold bonds in its portfolio at a $1.8 bln loss, caused by the rising interest rates. That worried clients, so they pulled even more money, until the regulator announced it was closing down SVB.

This month the ECB started to reduce its bond holdings as eurozone governments issued about €100bn of extra debt. ECB purchased €5 tln of assets during quantitative easing and €1.7 tln during the pandemic. Not replacing all maturing bonds would reduce its holdings by €25 bln per month, increasing the net bond supply to €700bn, from €150bn last year.

Investments in renewables fall due to rising interest rates and higher materials costs to less than half of the planned $1 trillion a year. Unlike power stations that require fuel, the majority of the cost for renewables comes upfront. This makes the sector sensitive to changes in financing. Higher interest rates affest winds, solar, as well as energy storage.

The European Commission has proposed a plan to make Europe independent from Russian fossil fuels. REPowerEU will seek to diversify natural gas supplies, speed up the roll-out of renewable gases, and replace gas in heating and power generation. This can reduce EU demand for Russian gas by two thirds before the end of the year.

Under the EU’s current energy market design, electricity prices are tied to gas prices, which meant the squeeze on gas supplies also pushed up electricity costs. Germany and the Netherlands opposed changes. EU countries will, instead, support: long-term “power purchase agreements”, cuts to consumption at peak times, and electricity storage.

Junior debt issued by banks is risky. It only gets paid back after other bonds. But due to short duration, the losses are modest, when the interest rates rise, and they offer higher return. European banks’ junior debt, known as contingent convertibles, is up 2.8% this year, as analysts for now don't see major risks in the European banking sector.

The trend this year is towards longer-dated new European corporate bond deals, where yields are lower than on shorter-dated debt, but issuers need to offer yield premium over their existing debt, 30 basis points or more. Euro investment-grade corporate issuance in the first two months of this year was €68 billion, with the average maturity of 9 years.

This is the verdict of the MLIV Pulse survey. The reasons are continued rate hikes and fear of a potential bear market. Short-term Treasury bills beat the classic 60/40 portfolio and even high-yield savings accounts pay savers close to 4%. Most investors also believe that passive funds tracking the S&P 500 will beat active equity funds, after fees, in 2023.

Companies issue bonds with the option to buy them back after one year, if interest rates drop, and they enter into an interest-rate swap with a bank, which the bank can cancel after one year. Both are interest-rate options, but that option is more expensive in the derivatives market than in the bond market. The benefit are lower coupons of such bonds.

New rules could sharply reduce the volume of bonds that qualify for a green label. So far, dirty industries could raise cash to fund a small part of their activities. To be labelled “green” under the new rules, 85% of the funds raised by the issuance must be allocated to activities that align with the EU’s taxonomy, which defines sustainable investments.