[MARKET ANALYSIS] Fixed falters after the weekend's US-Iran action. Gilts await Healey. Bunds digest AfD strength in Saxony-Anhalt.

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UK Chancellor Healey says borrowing costs are at a historic high, fiscal discipline underwrites every promise the government makes and the UK must have a buffer to protect against uncertainty

Siegmund, the AfD candidate for Germany's Saxony-Anhalt, says he would stand as regional premier if AfD has a stable majority

[MARKET ANALYSIS] Fixed falters after the weekend's US-Iran action. Gilts await Healey. Bunds digest AfD strength in Saxony-Anhalt.

European Sentix Investors Sentiment 5.1 vs. Exp. 1.6 (Prev. 0.9)

Japan reportedly sees a US President Trump and PM Takaichi talk in late September, Kyodo reports

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  • A bearish start to the week for fixed income, weighed on by upside in the energy space as the US and Iran clashed over the weekend. At most, this sent Bunds to a 122.83 base with downside of 21 ticks. However, the benchmark was also weighed on by the strength of AfD in the Saxony-Anhalt regional election, with 44% of the vote but a few seats shy of an outright majority. It now remains to be seen if AfD will work with BSW to some degree, or if they will attempt to lead a minority. Additionally, we look to Chancellor Merz’s response, particularly ahead of two more regional elections later in the month.
  • Elsewhere, Gilts opened on the backfoot, lower by just under 30 ticks at most hitting a 85.90 base. Primarily awaiting the now-underway speech from Chancellor Healey, which isn’t expected to drop any major policy moves, but will see some modest regional funding announced and much focus on growth and fiscal discipline.
  • Note, the bearish bias remains but has significantly moderated amid a pullback in energy into the red by around USD 0.20/bbl for Brent, downside that comes on the Iranian Foreign Minister’s briefing which extended on the constructive weekend Hormuz language between themselves and Oman. As such, Bunds and Gilts are now lower by just a handful of ticks.
  • To remind, today is a US market holiday.

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