[MARKET ANALYSIS] Energy continues to dictate fixed as we count down to Wednesday's FOMC

Newsquawk Staff · 28 Jul 2026, 09:47 UTC

Another firmer session for fixed income, as the pause in strikes between the US and Iran continues and after US President Trump suggested that they are talking. Further, Reuters sources this morning suggest that Oman has presented Iran with a proposal for voluntary Hormuz fees, and Al Jazeera says Iran is demonstrating some “flexibility” over Hormuz, points that have added further pressure to energy.
Broadly speaking, we now await an update to the above, and in particular how the talks between the US and Iran are going and if it can come to a meaningful pause in the conflict.
USTs bid by around five ticks at best, peaking at 108-24+, just above Monday’s 108-22 peak, but still shy of last week’s 109-00 and then 109-08+ peaks. The data ahead features a handful of data points before a 7yr auction. Monday’s 2yr was strong, though the 5yr was soft.
Bunds reside around 10 ticks off the 125.21 high, though still with gains of the same amount, trading directionally in-line with USTs but with a slightly greater magnitude of gains, potentially as USTs look to the Fed and the c. 30% implied probability of a July hike.
No move to the morning’s supply from the Netherlands, UK (tender) or Italy.
Gilts opened on the front foot and, as usual, post modest outperformance in the energy-driven environment. Gapped higher by 10 ticks at the open before climbing to a 87.48 peak, taking out last week’s best and now looking to 87.60, 87.72 and 87.82 from the week before that.

What our latest note said

US Market Open, 23 Oct, 10:15 UTC · what it led with

US President Trump says the US crushed Iran, and may want to do it a "little more".
Crude benchmarks firmer on ongoing tensions in the Middle East; recent bout of strength comes after the Houthis launched another missile towards Saudi interests.

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Riksbank maintains its rate at 1.75% as expected; assesses that the probability of a rate increase later this year remains; there is considerable uncertainty and developments call for vigilance
EUR/SEK+0.3%
Norges Bank maintains its rate at 4.25% as expected; may still become necessary to raise the policy rate
EUR/NOK+0.6%
Iran and US talks continue, and reports that the deal is close are wrong.
WTI crude+1.5%

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