[MARKET ANALYSIS] Fixed income benefitting from lower energy prices as hawkish pricing pares back slightly

An overall positive start in the fixed income benchmarks, with energy prices falling and higher hopes of a potential end to the Iran conflict. President Trump stated that the war is coming to an end, while a White House official said that the President is confident that an agreement will be reached soon.
USTs are trading at the upper end of a 111-10 to 111-14+ range, albeit off best levels, as energy prices rebound slightly. Price action is set to remain rangebound ahead of a flurry of data and Fed speak, while Trump is set to speak at 21:00EDT/02:00BST.
Bunds, in tandem with its peers, are gaining and currently holding above the 126 handle. The 10yr yield extends further below 3.0%, printing a trough at 2.933% before bouncing slightly. EZ final manufacturing PMI ticked slightly higher above the prelim. Figure but failed to drive any move in EGBs. In addition, ECB speakers reiterated the impact higher energy prices have on the European economy.
Gilts outperform, continuing to be the beneficiary of lower energy prices, as BoE pricing remains sensitive to oil prices. Pricing for rate hikes have pulled back, now price in 44bps of hikes in 2026.