[MARKET ANALYSIS] A choppy start for fixed income with energy/risk dictating

A choppy start to the day with benchmarks in narrower ranges than usual, though still posting a c. 50 ticks band for Bunds, for instance. Action this morning has largely been a function of energy and, by extension, the general risk tone. A grind higher in the first few hours in energy benchmarks to a USD 98.09/bbl peak for WTI sparked a bout of fixed downside, equity pressure and USD strength.
However, the move in fixed income has pared with benchmarks marginally firmer as energy wanes from best. The main headline update amidst this was Axios reporting that US President Trump told the G7 on Wednesday that Iran was close to surrender; however, commentary from the new Supreme Leader on Thursday and Iran announcing a fresh wave of attacks today somewhat disputes that assessment.
Specifically, USTs in a 111-12 to 111-20 band, currently firmer by a tick or two in that. Nonetheless, the benchmark is set to end the week lower by around a full point.
For Bunds, they are yet to make a lasting move into the green, despite hitting a 126.18 peak with gains of two ticks briefly. Drivers much the same as above. Furthermore, the benchmark is also set to end the week lower by around a full point.
Finally, Gilts opened lower by just under 20 ticks today before slipping to a 88.49 low and then rebounding to near-enough unchanged. Downside a function of the benchmark catching up to post-close action and the morning's initial energy move. However, this was somewhat offset by the morning's data showing the UK started the year with no growth.
A series that may have otherwise cemented a March cut by the BoE. However, the recent Middle East related energy disruption and associated moves mean a near-term cut is entirely off the table, though the MPC will likely remain divided next week in another split decision. Nonetheless, the data does factor in favour of calls for the BoE to still ease at some point in 2026, and perhaps on more than one occasion.