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[MARKET ANALYSIS] USTs and Gilts soar as energy prices fall, with strength also facilitated by trade optimism

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UKMTO has received a report of an incident involving a vessel transiting the Strait of Hormuz, reported at 07:30 UTC; tanker conducting an inbound transit was struck by an unknown projectile

[MARKET ANALYSIS] USTs and Gilts soar as energy prices fall, with strength also facilitated by trade optimism

Irish Data Protection Commission has fined Alphabet (GOOGL) EUR 400mln regarding a location-data investigation

[MARKET ANALYSIS] Bunds and OATs firmer as energy movements overwrite domestic developments for now

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  • USTs (+8 ticks) are stronger this morning, benefiting from 1) falling energy prices and 2) markets awaiting the US-China meeting at the White House on Thursday. On the first point, supply disruptions remain, and Trump recently said he is thinking of “blowing up” all of Iran. It seems as if markets are shifting their attention to the UNGA this week, with Trump reportedly set to meet Gulf leaders and then President Xi. There may be growing hopes that a framework agreement/deal can be ironed out; recent reports have noted that Pakistan’s Interior Minister has travelled to Iran.
  • On the trade front, mood music between the US and China is constructive; Trump has suggested he has a good relationship with Xi, whilst Treasury Sec. Bessent mentioned that recent talks have been constructive. Heading into the meeting, it was reported that China had upped its US soy cargoes, whilst China’s rare earth shipments to the US have dropped.
  • Yields are lower across the curve, with very slight underperformance at the belly. The US 10-year (4.96%) has now slipped below the key 5.00% mark, given the aforementioned energy dynamics. A constructive UNGA mood and/or geopolitical progress could help the 10-year continue to slip to near-term lows, with 4.92% a likely area of support (low from 18 Sep).
  • Gilts (+72 ticks) outperform vs peers, and currently hold towards the upper end of an 85.28 to 85.76 range. UK-specific news flow has been focused on pre-budget speculation around housing and CGT, but with action in UK paper today ultimately driven by energy dynamics. On trade relations, UK PM Burnham is set to meet US President Trump this week. Reports suggest that the talks between the pair will focus on the Middle East, energy costs and the ongoing Russia-Ukraine conflict.
  • For Bund, OAT and BTP analysis, please see the Market Analysis piece at 10:08 BST.

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