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[MARKET ANALYSIS] Fixed income firmer despite energy being in the green, though off best; Powell ahead

Today's firmness in fixed income markets contrasts with recent trends, suggesting a shift in sentiment partly driven by easing energy prices.

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Iranian Foreign Ministry spokesperson says Iran has not had any direct negotiations with America; messages from intermediaries discussed; did not partake in Pakistan-led meetings, Tasnim reports; says US demand were excessive.

Ukrainian President Zelensky says Ukraine is ready for a potential Easter ceasefire with Russia, believes there is no deadlock in talks and that Ukraine has received signals from allies on scaling back strikes on Russia's oil sector

[MARKET ANALYSIS] Fixed income firmer despite energy being in the green, though off best; Powell ahead

[MARKET ANALYSIS] Firmer crude prices amid geopolitical weekend escalation; metals also trade firmer

Turkish Finance Minister and CBRT governor to hold large-scale investor meetings and one-on-one meetings in London this week, reports suggest citing bankers

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  • Despite crude still being firmer, fixed income has managed to benefit from crude easing off best levels, with both energy and debt benchmarks in the green, departing from the recent inverse correlation.
  • In short, the weekend saw a further escalation of rhetoric, but there was no 'final blow' or similar from the US, while reporting around a ground invasion continues, however, reports suggest US President Trump is leaning against such action. Since, a handful of ballistic missiles have been fired by Iran while US positions in various nations have been subject to attempted drone strikes.
  • Overnight, JGBs hit a contract low of 129.82, but then bounced back above the handle and last week's 130.06 close. A rebound that occurred after remarks from FX diplomat Mimura and BoJ Governor Ueda; both officials focused on FX, with Mimura outlining that action may be needed if the situation continues, while Ueda said they are monitoring FX closely.
  • Bunds hit a 124.48 low early doors, matching Friday's close. Since, the benchmark has been gradually but notably making its way higher, to a 124.88 peak with gains of 40 ticks at best. Though, a short-lived bout of pressure was seen as German State CPIs lifted from the prior, as indicated by mainland consensus; figures due at 13:00BST. More recently, no move to a jump in consumer and selling price expectations.
  • USTs in-fitting. Hit a 110-04 trough, lower by two ticks at worst. Since, USTs have rebounded to a 110-17+ peak. Ahead, the docket is headlined by Fed Chair Powell, who is scheduled to speak at Harvard University. Commentary that will be scrutinised for which side of the dual-mandate the Fed is currently most concerned about, and any hints as to whether action should be expected in the near-term.
  • As is typically the case, Gilts are directionally following peers, but magnitudes are slightly larger. To an 87.60 peak with gains of nearly 50 ticks at best. Specifics for the UK light, awaiting to see what action the government and/or BoE may take to deal with the energy shock.
Context

Market participants are likely reacting to geopolitical tensions, particularly regarding U.S.-Iran relations, while awaiting insights from Fed Chair Powell's upcoming speech, which is expected to clarify the Fed's stance on inflation and growth.

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