[MARKET ANALYSIS] Fixed falters as energy soars

• Fixed benchmarks under pressure as energy prices continue to climb and bias yields higher. A narrative that is sparking a hawkish repricing for central banks, with the near-term odds of a BoE cut trimming significantly and ECB pricing implying a small chance of tightening by end-2026.
• Bunds are down by 88 ticks at most, to a 128.75 trough. If the move continues, we look to 128.03 from the week of February 13th before the figure and then a cluster of lows from the first few weeks of the year between 127.51 to 127.82. If those are taken out, the YTD base is 126.98 before the 126.75 March contract low.
• Gilts gapped lower by 54 ticks and then fell almost a full point lower to a 91.58 trough, lower by 143 ticks at worst. Pressure is a function of the energy narrative as discussed above. A point that has seen the odds of BoE easing in the near-term trim significantly, with pricing now less than a 50% chance of a March cut vs. c. 85% at the end of last week.
• For the UK, the docket is theoretically headline by the Spring Statement. Though, the expectation is firmly for Chancellor Reeves to be a non-event. Nonetheless, the forecasts and DMO remit will be of note; Newsquawk primer available at 09:01GMT.
• USTs are in-fitting directionally, though magnitudes are less pronounced than its UK or even German peers. Down to a 112-24 base with losses of c. 13 ticks. Ahead, the docket features a handful of data points before Fed speak from Williams and Kashkari (2026), with a text and Q&A expected from both. Though, of course, any fresh geopolitical escalation/moderation will dominate the narrative.

Fixed income markets are under pressure as rising energy prices lead to a hawkish repricing across central banks, particularly affecting expectations around the BoE and ECB. With a notable dip in both Bunds and Gilts, the market is reacting to a reduced chance of near-term easing from the BoE, while USTs follow suit but with less intensity. This dynamic could influence risk sentiment and the broader market narrative as we await further indications from central bank officials.