EU at risk of another energy crisis – media

Energy News Beat

Geopolitical tensions and supply challenges could have a direct impact on gas prices, according to an Oilprice report

The start of the peak consumption season in the EU amid rising demand from Asia could drive up prices for natural gas on the continent despite ample supply of liquified natural gas (LNG) globally, Oilprice reported this week.

According to the outlet, the situation has been worsened by a range of factors, such as geopolitical tensions, including the recent Houthi ship seizure. Supply-chain challenges, like the restrictions in the Panama Canal and risks in the Suez Canal, have also been causing concerns for global LNG shipping and pricing, the report added.

“Vulnerability to any occurrence that can influence prices was made crystal clear earlier this week when European benchmark prices jumped after the news broke of Houthis seizing a cargo ship in the Red Sea,” Oilprice wrote, noting that the ship was linked to an Israeli company and therefore was widely seen as a sign of a possible escalation of the conflict in the Middle East.

According to the report, citing S&P Global, some experts in the gas trading industry believe LNG prices won’t climb much higher, even in light of rising geopolitical risks in the Middle East.

Other experts reportedly suggest that shipping news has become quite important for all sorts of commodities lately due to restricted movement via the Panama Canal and riskier passage via the Suez Canal as a result of the Israel-Hamas conflict.

Asian buyers of US LNG have also been seeking alternative routes in the wake of the limited movement in the key choke-point between North and South America, which is expected to add to freight rates, the report noted.

“Speaking of supply, it may be plentiful, but as last year’s Freeport outage demonstrated, this abundance is one outage away from a disruption and a price spike,” Oilprice wrote.

The blast at a massive US gas export plant last June shut the facility down for the rest of the year. Freeport, which had accounted for a tenth of European LNG imports before the blast, only reopened in February this year. The force majeure has led to a spike in gas prices on the continent.

With temperatures dropping for winter, gas prices could climb higher in the EU, while global prices may be more resilient, Oilprice concluded.

A warm winter last year and efforts by the EU to build up stocks helped to avoid a recurrence of the 2021 energy crisis, when gas prices in the region spiked over €300 ($320) per megawatt hour following the bloc’s decision to shift away from Russian supplies.

European gas prices were volatile this week as traders weighed higher heating demand in colder weather with still nearly full EU inventories. The front-month Dutch TTF Natural Gas Futures, the benchmark for Europe’s gas trading, were trading 1.3% lower on Wednesday at $44.66 per megawatt-hour as of 11:04am GMT.

For more stories on economy & finance visit RT’s business section

 

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Escobar: The Eviction Notice Is Being Written, And Will Come In Four Languages

Energy News Beat

Authored by Pepe Escobar,

The Eviction Notice is being written. And it will come in four languages. Russian. Farsi. Mandarin. And last but not least, English…

A much-cherished pleasure of professional writing is to always be enriched by informed readers. This “eviction” insight – worth a thousand geopolitical treatises – was offered by one of my sharpest readers commenting on a column.

Concisely, what we have here expresses a deeply felt consensus across the spectrum not only in West Asia but also in most latitudes across the Global South/Global Majority.

The Unthinkable, in the form of a genocide conducted live, in real time on every smartphone in the third decade of the millennium – which I called the Raging Twenties in a previous book – has acted like a particle accelerator, concentrating hearts and minds.

Those that chose to set West Asia on fire are already confronting nasty blowback. And that goes way beyond diplomacy exercised by Global South leaders.

For the first time in ages, via President Xi Jinping, China has been more than explicit geopolitically (a true Sovereign cannot hedge when it comes to genocide). China’s unmistaken position on Palestine goes way beyond the geoeconomics routine of promoting BRI’s trade and transportation corridors.

All that while President Putin defined sending humanitarian aid to Gaza as a “sacred duty”, which in Russian code includes, crucially, the military spectrum.

For all the maneuvering and occasional posturing, for all practical purposes everyone knows the current UN arrangement is rotten beyond repair, totally impotent when it comes to imposing meaningful peace negotiations, sanctions or investigations of serial war crimes.

The new UN in the making is BRICS 11 – actually BRICS 10, considering new Trojan Horse Argentina in practice may be relegated to a marginal role, assuming it joins on January 1st, 2024.

BRICS 10, led by Russia-China, both regulated by a strong moral compass, keep their ear on the ground and listen to the Arab street and the lands of Islam. Especially their people, much more than their elites. This will be an essential element in 2024 during the Russian presidency of BRICS.

Even with no check out, you will have to leave

The current order of business in the New Great Game is to organize the expulsion of the Hegemon from West Asia – as much a technical challenge as a civilizational challenge.

As it stands, the Washington-Tel Aviv continuum are already prisoners of their own device. This ain’t no Hotel California; you may not check out any time you like, but you will be forced to leave.

That may happen in a relatively gentle manner – think Kabul as a Saigon remix – or if push comes to shove may involve a naval Apocalypse Now, complete with expensive iron bathtubs turned into sub-ocean coral reefs and the demise of CENTCOM and its AFRICOM projection.

The crucial vector all along is how Iran – and Russia – have played, year after year, with infinite patience, the master strategy devised by Gen. Soleimani, whose assassination actually started the Raging Twenties.

A de-weaponized Hegemon cannot defeat the “new axis of evil”, Russia-Iran-China, not only in West Asia but also anywhere in Eurasia, Asia-Pacific, and pan-Africa. Direct participation/normalization of the genocide only worked to accelerate the progressive, inevitable exclusion of the Hegemon from most of the Global South.

All that while Russia meticulously crafts the integration of the Black Sea, the Caspian Sea, the Baltic Sea (Finnish hysteria notwithstanding), the Arctic and the Northwestern Pacific Sea and China turbo-charges the integration of the South China Sea.

Xi and Putin are gifted players of chess and go – and profit from stellar advisers of the caliber of Patrushev and Wang Yi. China playing geopolitical go is an exercise in non-confrontation: all you need to do is to block your opponent’s ability to move.

Chess and go, in a diplomatic tandem, represent a game where you don’t interrupt your opponent when it is repeatedly shooting itself on the knees. As an extra bonus, you get your opponent antagonizing over 90% of the world’s population.

All that will lead to the Hegemon’s economy eventually collapsing. And then it can be beaten by default.

Western “values” buried under the rubble

As Russia, especially via Lavrov’s efforts, offers the Global South/Global Majority a civilizational project, focused on mutually respectful multipolarity, China via Xi Jinping offers the notion of “community with a shared future” and a set of initiatives, discussed in lengthy detail at the Belt & Road Initiative (BRI) Forum in Beijing in October, where Russia, not by accident, was the guest of honor.

A group of Chinese scholars concisely frame the approach as China “creating/facilitating global nodes for relating/communicating and platforms for concrete collaboration/practical exchanges. The participants remains Sovereign, contribute to the common endeavor (or simply specific projects) and receive benefits making them willing to keep on.”

It’s as if Beijing was acting as a sort of shining star and guiding light.

In sharp contrast, what remains of Western civilization – certainly with not much to do with Montaigne,

Pico della Mirandola or Schopenhauer – increasingly plunges into a self-constructed Heart of Darkness (without Conrad’s literary greatness), confronting the true, irredeemably horrifying face of conformist, subservient individualism.

Welcome to the New Medievalism, precipitated by the “kill apps” of Western racism, as argued in a brilliant book, Chinese Cosmopolitanism, by scholar Shuchen Xiang, professor of Philosophy at Xidan University.

The “kill apps” of Western racism, writes Prof. Xiang, are fear of change; the ontology of bivalent dualism; the invention of the ‘barbarian’ as the racial Other; the metaphysics of colonialism; and the insatiable nature of this racist psychology. All these “apps” are now exploding, in real time, in West Asia. The key consequence is that the Western “values” construct has already perished, buried under the Gaza rubble.

Now to a ray of light: a case can be made – and we’ll be back to it – that orthodox Christianity, moderate Islam and several strands of Taoism/Confucianism may embrace the future as the three main civilizations of a cleansed Mankind.

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NATO’s Proposed “Military Schengen” Is A Thinly Disguised German Power Play Over Poland

Energy News Beat

Authored by Andrew Korybko via Substack,

NATO logistics chief Lieutenant-General Alexander Sollfrank suggested the creation of a so-called “military Schengen” for optimizing the movement of such equipment across the EU. At present, bureaucratic and logistical obstacles impede the free flow of arms throughout the bloc, which he believes could hamstring the West’s ability to respond to any unexpected conflict along its periphery. It’s not just this proposal’s substance that’s significant, however, but also its timing.

NATO’s Proxy War On Russia Through Ukraine Appears To Be Winding Down” for the reasons explained in the preceding hyperlinked analysis. Accordingly, Bloomberg’s report about the EU’s draft security guarantees to Ukraine conspicuously omits any mention of mutual defense obligations of the kind that Kiev has sought for years and which greatly contributed to the latest phase of this nearly decade-long conflict. Sollfrank’s suggestion therefore seems to contradict these emerging de-escalation trends.

Upon reflection, however, it’s actually revealed to be a thinly disguised Germany power play over Poland. The EU’s informal leader ramped up its regional competition with Poland in mid-August through its promised military patronage of Ukraine, which readers can learn more about in that hyperlinked analysis. In brief, Poland aspired to become the leader of Central & Eastern Europe (CEE) throughout the course of the NATO-Russian proxy war, but Germany rose to the occasion to challenge its ambitions.

The liberal-globalist opposition coalition’s victory in last month’s Polish elections, which its Foreign Minister earlier accused Germany of meddling in, will likely result in former Prime Minister and European Council President Donald Tusk’s return to the premiership. In that event, this German-aligned politician could voluntarily subordinate his country to Berlin, thus resulting in Poland ceding its envisaged regional sphere of influence to that country and becoming its largest-ever vassal indefinitely.

Tusk’s plans to improve ties with the de facto German-controlled EU are regarded by conservative-nationalists as a means to that end, particularly due to that body’s efforts to further erode Polish sovereignty. Although he claims to oppose changes to the EU Treaty, some doubt his sincerity and suspect that he slyly wants to prevent large-scale protests over this issue. If these two scenarios come to pass, then Poland’s sovereignty would be further reduced, including in the defense sphere.

Prior to last month’s elections, Germany and Poland were competing to build the EU’s largest military, but the aforesaid sequence of events could result in Warsaw throwing in the towel. Even though its next potential Defense Minister said that his country won’t cancel any of its military contracts, conservative-nationalists also suspect that he’s either being insincere or could be coerced by Berlin/Brussels into doing so. All things considered, these concerns are credible and should be taken seriously.

Germany’s national interests as its incumbent policymakers conceive them to be rest in becoming the EU’s hegemon, which necessitates neutralizing Poland’s ambitions to lead the CEE space, ergo its alleged support of Tusk and speculative efforts to erode Polish sovereignty via the EU. These moves importantly preceded NATO’s proposed “military Schengen”, and that’s not by coincidence either. Rather, they’re meant to facilitate Germany’s unprecedented post-WWII power play over Poland.

If Tusk improves ties with the EU like he promised, complies with any EU Treaty changes despite unconvincingly claiming to oppose them, and the “military Schengen” is imposed upon his country, then German forces could return to Poland en masse on the pretext of defending the EU from Russia. This doesn’t contradict the de-escalation trends pertaining to the NATO-Russian proxy war, but complements them since it could be spun as compensating for the lack of Article 5-like guarantees to Ukraine.

On the one hand, the EU would wisely avoid laying any tripwires that Kiev could maliciously exploit to provoke a larger conflict with Russia upon the inevitable freezing of the present one (whenever that happens), while at the same time reassuring the public that they can still adequately respond if need be. The “military Schengen” would serve the purpose of enabling the bloc’s de facto German leader to swiftly dispatch its forces, which are planned to be the EU’s largest, to the eastern frontier in that event.

It goes without saying that they’d have to transit through Poland and could easily end up deployed there indefinitely, whether as a so-called “deterrent to Russian aggression” or as part of a preplanned response to an artificially manufactured (i.e. false flag) border incident. After having voluntarily subordinated itself to Berlin under Tusk as is soon expected for the reasons that were explained, the restoration of German hegemony over Poland would therefore be completed without firing a shot.

In that scenario, which Polish conservative-nationalists are powerless to prevent and can only be offset by unlikely variables beyond their control, Germany would essentially be tasked by the US with “containing” Russia in Europe as part of Washington’s “Lead From Behind” stratagem. Once that country’s continental hegemony is fully secured through the means that were described in this analysis, America can then more confidently “Pivot (back) to Asia” to focus on containing China.

Those two superpowers are currently in the midst of an incipient thaw as proven by the positive outcome of their leaders’ latest face-to-face meeting earlier this month on the sidelines of the APEC Summit in San Francisco, but it can’t be taken for granted that this trend will continue. It therefore makes sense for the US to outsource its anti-Russian containment operations in Europe to Germany in order to free up the resources required for more muscularly containing China in Asia if this thaw fails.

As has traditionally been the case throughout history, Polish sovereignty is once again in the process of being sacrificed as part of the Great Powers’ games, but this time its borders will remain intact even though the country is poised to functionally become a German vassal in the coming future. There are indeed some variables beyond Poland’s control that could offset this scenario, but they’re very unlikely, so it’s probably a fait accompli by this point that Poland will play second fiddle to Germany indefinitely.

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These Are The Top 50 Largest Importers In The World

Energy News Beat

In 2022, global imports climbed to $25.6 trillion in value, or about the size of the U.S. GDP.

As an engine of growth, global trade broadens consumer choices and can lower the cost of goods. For businesses, it can improve the quality of inputs and strengthen competitiveness.

In the graphic below, Visual Capitalist’s Dorothy Neufeld and Christina Kostandi show the 50 largest importers, with data from the World Trade Organization.

Which Countries Import the Most Goods?

With $3.4 trillion in imports in 2022, the U.S. is the largest importer globally.

Even though higher inflation and market uncertainty loomed over the economy, U.S. imports increased 15% annually, with China as its top goods importing partner.

As the world’s second-largest economy, China’s imports hit $2.7 trillion in value, although growth slowed in 2022.

Taiwan, China’s top trading partner for imports, is a major provider of electronics products, including semiconductor chips. However, the China-Taiwan trade relationship remains complicated given geopolitical tensions sparking unexpected import bans.

A handful of European countries also fell in the top 10 importers, led by Germany and the Netherlands. Overall, the European Union is the largest importer of agricultural products, fuels and mining products, and automotive products globally.

Global Trade Fragmentation

In 2023, the World Trade Organization projects that import volumes will contract as much as 1.2% across North and South America, Asia, and Europe.

In part, this is being driven by slower demand in manufacturing economies.

Whether or not this weaker volume is also being impacted by trade fragmentation remains unclear. One indicator may be seen in the trade of intermediate goods, which are products like wood and steel that are used in the production of a final good.

In the first half of 2023, the share of intermediate goods in world trade dropped to 48.5%, down from its three-year average of 51%. On the one hand, this may suggest that supply chains are contracting. Yet it may also be due to the influence of higher commodity prices, which have a bigger impact on the cost of intermediate goods than on final goods.

Still, other factors have an impact on the flow of trade. These include subsidies, export bans, and legislative policy, such as the $52.7 billion U.S. CHIPS Act, that incentivizes local production of semiconductors.

Considering these factors, broader trends of global de-globalization remain to be seen.

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Zurich Issues Digital Bond Using Wholesale CBDC

Energy News Beat

On Monday the Canton of Zurich issued a CHF 100 million ($113m) digital bond via the SIX Digital Exchange, Ledger Insights reported. While most of the bond terms were unexciting – it has an 11 year term and a coupon of 1.45%  – the most distinctive aspect is this transaction is that it settles using a wholesale central bank digital currency (wholesale CBDC) issued by the Swiss National Bank (SNB).

The joint lead managers on the issuance were Zürcher Kantonalbank, UBS and Raiffeisen Switzerland. Zürcher and UBS were announced as part of the CBDC pilot earlier this month, but Raiffeisen was not.

A Zurich spokesperson confirmed that wholesale CBDC settlement takes place on December 1 and only for the two pilot banks. Raiffeisen and the Canton of Zurich will receive conventional Swiss francs, not wholesale CBDC. At that point, the bond will be listed on both the SIX Digital Exchange and the main SIX Swiss Exchange.

While there have been plenty of wholesale CBDC trials, two things are distinctive about this pilot.First, the SNB is allowing the use of a live wholesale CBDC over an extended timeframe.Second, the SDX platform on which the SNB issues the CBDC is not a test platform. It is the same production platform that SDX has used for issuing tokenized Swiss francs used for previous SDX settlements.  

Meanwhile, in February the City of Lugano issued a CHF 100 million tokenized bond via SDX with investors able to invest via the SDX central securities depository (CSD) or the conventional SIS CSD. Enabling the use of the SIS CSD means that investors don’t need to be up to speed with DLT and hence significantly improves liquidity. It was the first digital bond to qualify for SNB’s repo.

Zurich confirmed it is similar, subject to the repo approval by the central bank, but it expects to qualify as HQLA Level 1. Additionally, it expects an S&P issuance rating of AAA.

How does settlement work given there are two CSDs?

One point of curiosity is how it’s possible to support settlement on both SIS (T+2 settlement) and SDX (T0) given the different settlement timeframes. The two CSDs are integrated, but because the bonds are natively digital, the SDX CSD is the primary registry.

Exchange trades executed on one exchange cannot settle on the other. Any trade executed on the SIX Digital Exchange settles atomically via the SDX CSD. On-exchange trades executed via the main SIX stock exchange settle in two days via the SIS CSD using x-clear, SIX’s pan-European central counterparty. One can assume that at the two day point, SDX’s blockchain logs the change in real time. Over the counter trades can settle on either CSD.

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The post Zurich Issues Digital Bond Using Wholesale CBDC appeared first on Energy News Beat.

 

Zurich Issues Digital Bond Using Wholesale CBDC

Energy News Beat

On Monday the Canton of Zurich issued a CHF 100 million ($113m) digital bond via the SIX Digital Exchange, Ledger Insights reported. While most of the bond terms were unexciting – it has an 11 year term and a coupon of 1.45%  – the most distinctive aspect is this transaction is that it settles using a wholesale central bank digital currency (wholesale CBDC) issued by the Swiss National Bank (SNB).

The joint lead managers on the issuance were Zürcher Kantonalbank, UBS and Raiffeisen Switzerland. Zürcher and UBS were announced as part of the CBDC pilot earlier this month, but Raiffeisen was not.

A Zurich spokesperson confirmed that wholesale CBDC settlement takes place on December 1 and only for the two pilot banks. Raiffeisen and the Canton of Zurich will receive conventional Swiss francs, not wholesale CBDC. At that point, the bond will be listed on both the SIX Digital Exchange and the main SIX Swiss Exchange.

While there have been plenty of wholesale CBDC trials, two things are distinctive about this pilot.First, the SNB is allowing the use of a live wholesale CBDC over an extended timeframe.Second, the SDX platform on which the SNB issues the CBDC is not a test platform. It is the same production platform that SDX has used for issuing tokenized Swiss francs used for previous SDX settlements.  

Meanwhile, in February the City of Lugano issued a CHF 100 million tokenized bond via SDX with investors able to invest via the SDX central securities depository (CSD) or the conventional SIS CSD. Enabling the use of the SIS CSD means that investors don’t need to be up to speed with DLT and hence significantly improves liquidity. It was the first digital bond to qualify for SNB’s repo.

Zurich confirmed it is similar, subject to the repo approval by the central bank, but it expects to qualify as HQLA Level 1. Additionally, it expects an S&P issuance rating of AAA.

How does settlement work given there are two CSDs?

One point of curiosity is how it’s possible to support settlement on both SIS (T+2 settlement) and SDX (T0) given the different settlement timeframes. The two CSDs are integrated, but because the bonds are natively digital, the SDX CSD is the primary registry.

Exchange trades executed on one exchange cannot settle on the other. Any trade executed on the SIX Digital Exchange settles atomically via the SDX CSD. On-exchange trades executed via the main SIX stock exchange settle in two days via the SIS CSD using x-clear, SIX’s pan-European central counterparty. One can assume that at the two day point, SDX’s blockchain logs the change in real time. Over the counter trades can settle on either CSD.

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The post Zurich Issues Digital Bond Using Wholesale CBDC appeared first on Energy News Beat.

 

Zurich Issues Digital Bond Using Wholesale CBDC

Energy News Beat

On Monday the Canton of Zurich issued a CHF 100 million ($113m) digital bond via the SIX Digital Exchange, Ledger Insights reported. While most of the bond terms were unexciting – it has an 11 year term and a coupon of 1.45%  – the most distinctive aspect is this transaction is that it settles using a wholesale central bank digital currency (wholesale CBDC) issued by the Swiss National Bank (SNB).

The joint lead managers on the issuance were Zürcher Kantonalbank, UBS and Raiffeisen Switzerland. Zürcher and UBS were announced as part of the CBDC pilot earlier this month, but Raiffeisen was not.

A Zurich spokesperson confirmed that wholesale CBDC settlement takes place on December 1 and only for the two pilot banks. Raiffeisen and the Canton of Zurich will receive conventional Swiss francs, not wholesale CBDC. At that point, the bond will be listed on both the SIX Digital Exchange and the main SIX Swiss Exchange.

While there have been plenty of wholesale CBDC trials, two things are distinctive about this pilot.First, the SNB is allowing the use of a live wholesale CBDC over an extended timeframe.Second, the SDX platform on which the SNB issues the CBDC is not a test platform. It is the same production platform that SDX has used for issuing tokenized Swiss francs used for previous SDX settlements.  

Meanwhile, in February the City of Lugano issued a CHF 100 million tokenized bond via SDX with investors able to invest via the SDX central securities depository (CSD) or the conventional SIS CSD. Enabling the use of the SIS CSD means that investors don’t need to be up to speed with DLT and hence significantly improves liquidity. It was the first digital bond to qualify for SNB’s repo.

Zurich confirmed it is similar, subject to the repo approval by the central bank, but it expects to qualify as HQLA Level 1. Additionally, it expects an S&P issuance rating of AAA.

How does settlement work given there are two CSDs?

One point of curiosity is how it’s possible to support settlement on both SIS (T+2 settlement) and SDX (T0) given the different settlement timeframes. The two CSDs are integrated, but because the bonds are natively digital, the SDX CSD is the primary registry.

Exchange trades executed on one exchange cannot settle on the other. Any trade executed on the SIX Digital Exchange settles atomically via the SDX CSD. On-exchange trades executed via the main SIX stock exchange settle in two days via the SIS CSD using x-clear, SIX’s pan-European central counterparty. One can assume that at the two day point, SDX’s blockchain logs the change in real time. Over the counter trades can settle on either CSD.

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The post Zurich Issues Digital Bond Using Wholesale CBDC appeared first on Energy News Beat.

 

Zurich Issues Digital Bond Using Wholesale CBDC

Energy News Beat

On Monday the Canton of Zurich issued a CHF 100 million ($113m) digital bond via the SIX Digital Exchange, Ledger Insights reported. While most of the bond terms were unexciting – it has an 11 year term and a coupon of 1.45%  – the most distinctive aspect is this transaction is that it settles using a wholesale central bank digital currency (wholesale CBDC) issued by the Swiss National Bank (SNB).

The joint lead managers on the issuance were Zürcher Kantonalbank, UBS and Raiffeisen Switzerland. Zürcher and UBS were announced as part of the CBDC pilot earlier this month, but Raiffeisen was not.

A Zurich spokesperson confirmed that wholesale CBDC settlement takes place on December 1 and only for the two pilot banks. Raiffeisen and the Canton of Zurich will receive conventional Swiss francs, not wholesale CBDC. At that point, the bond will be listed on both the SIX Digital Exchange and the main SIX Swiss Exchange.

While there have been plenty of wholesale CBDC trials, two things are distinctive about this pilot.First, the SNB is allowing the use of a live wholesale CBDC over an extended timeframe.Second, the SDX platform on which the SNB issues the CBDC is not a test platform. It is the same production platform that SDX has used for issuing tokenized Swiss francs used for previous SDX settlements.  

Meanwhile, in February the City of Lugano issued a CHF 100 million tokenized bond via SDX with investors able to invest via the SDX central securities depository (CSD) or the conventional SIS CSD. Enabling the use of the SIS CSD means that investors don’t need to be up to speed with DLT and hence significantly improves liquidity. It was the first digital bond to qualify for SNB’s repo.

Zurich confirmed it is similar, subject to the repo approval by the central bank, but it expects to qualify as HQLA Level 1. Additionally, it expects an S&P issuance rating of AAA.

How does settlement work given there are two CSDs?

One point of curiosity is how it’s possible to support settlement on both SIS (T+2 settlement) and SDX (T0) given the different settlement timeframes. The two CSDs are integrated, but because the bonds are natively digital, the SDX CSD is the primary registry.

Exchange trades executed on one exchange cannot settle on the other. Any trade executed on the SIX Digital Exchange settles atomically via the SDX CSD. On-exchange trades executed via the main SIX stock exchange settle in two days via the SIS CSD using x-clear, SIX’s pan-European central counterparty. One can assume that at the two day point, SDX’s blockchain logs the change in real time. Over the counter trades can settle on either CSD.

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The post Zurich Issues Digital Bond Using Wholesale CBDC appeared first on Energy News Beat.

 

Zurich Issues Digital Bond Using Wholesale CBDC

Energy News Beat

On Monday the Canton of Zurich issued a CHF 100 million ($113m) digital bond via the SIX Digital Exchange, Ledger Insights reported. While most of the bond terms were unexciting – it has an 11 year term and a coupon of 1.45%  – the most distinctive aspect is this transaction is that it settles using a wholesale central bank digital currency (wholesale CBDC) issued by the Swiss National Bank (SNB).

The joint lead managers on the issuance were Zürcher Kantonalbank, UBS and Raiffeisen Switzerland. Zürcher and UBS were announced as part of the CBDC pilot earlier this month, but Raiffeisen was not.

A Zurich spokesperson confirmed that wholesale CBDC settlement takes place on December 1 and only for the two pilot banks. Raiffeisen and the Canton of Zurich will receive conventional Swiss francs, not wholesale CBDC. At that point, the bond will be listed on both the SIX Digital Exchange and the main SIX Swiss Exchange.

While there have been plenty of wholesale CBDC trials, two things are distinctive about this pilot.First, the SNB is allowing the use of a live wholesale CBDC over an extended timeframe.Second, the SDX platform on which the SNB issues the CBDC is not a test platform. It is the same production platform that SDX has used for issuing tokenized Swiss francs used for previous SDX settlements.  

Meanwhile, in February the City of Lugano issued a CHF 100 million tokenized bond via SDX with investors able to invest via the SDX central securities depository (CSD) or the conventional SIS CSD. Enabling the use of the SIS CSD means that investors don’t need to be up to speed with DLT and hence significantly improves liquidity. It was the first digital bond to qualify for SNB’s repo.

Zurich confirmed it is similar, subject to the repo approval by the central bank, but it expects to qualify as HQLA Level 1. Additionally, it expects an S&P issuance rating of AAA.

How does settlement work given there are two CSDs?

One point of curiosity is how it’s possible to support settlement on both SIS (T+2 settlement) and SDX (T0) given the different settlement timeframes. The two CSDs are integrated, but because the bonds are natively digital, the SDX CSD is the primary registry.

Exchange trades executed on one exchange cannot settle on the other. Any trade executed on the SIX Digital Exchange settles atomically via the SDX CSD. On-exchange trades executed via the main SIX stock exchange settle in two days via the SIS CSD using x-clear, SIX’s pan-European central counterparty. One can assume that at the two day point, SDX’s blockchain logs the change in real time. Over the counter trades can settle on either CSD.

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The post Zurich Issues Digital Bond Using Wholesale CBDC appeared first on Energy News Beat.

 

Zurich Issues Digital Bond Using Wholesale CBDC

Energy News Beat

On Monday the Canton of Zurich issued a CHF 100 million ($113m) digital bond via the SIX Digital Exchange, Ledger Insights reported. While most of the bond terms were unexciting – it has an 11 year term and a coupon of 1.45%  – the most distinctive aspect is this transaction is that it settles using a wholesale central bank digital currency (wholesale CBDC) issued by the Swiss National Bank (SNB).

The joint lead managers on the issuance were Zürcher Kantonalbank, UBS and Raiffeisen Switzerland. Zürcher and UBS were announced as part of the CBDC pilot earlier this month, but Raiffeisen was not.

A Zurich spokesperson confirmed that wholesale CBDC settlement takes place on December 1 and only for the two pilot banks. Raiffeisen and the Canton of Zurich will receive conventional Swiss francs, not wholesale CBDC. At that point, the bond will be listed on both the SIX Digital Exchange and the main SIX Swiss Exchange.

While there have been plenty of wholesale CBDC trials, two things are distinctive about this pilot.First, the SNB is allowing the use of a live wholesale CBDC over an extended timeframe.Second, the SDX platform on which the SNB issues the CBDC is not a test platform. It is the same production platform that SDX has used for issuing tokenized Swiss francs used for previous SDX settlements.  

Meanwhile, in February the City of Lugano issued a CHF 100 million tokenized bond via SDX with investors able to invest via the SDX central securities depository (CSD) or the conventional SIS CSD. Enabling the use of the SIS CSD means that investors don’t need to be up to speed with DLT and hence significantly improves liquidity. It was the first digital bond to qualify for SNB’s repo.

Zurich confirmed it is similar, subject to the repo approval by the central bank, but it expects to qualify as HQLA Level 1. Additionally, it expects an S&P issuance rating of AAA.

How does settlement work given there are two CSDs?

One point of curiosity is how it’s possible to support settlement on both SIS (T+2 settlement) and SDX (T0) given the different settlement timeframes. The two CSDs are integrated, but because the bonds are natively digital, the SDX CSD is the primary registry.

Exchange trades executed on one exchange cannot settle on the other. Any trade executed on the SIX Digital Exchange settles atomically via the SDX CSD. On-exchange trades executed via the main SIX stock exchange settle in two days via the SIS CSD using x-clear, SIX’s pan-European central counterparty. One can assume that at the two day point, SDX’s blockchain logs the change in real time. Over the counter trades can settle on either CSD.

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