[MARKET ANALYSIS] USTs bid alongside global benchmarks, given the muted risk tone and dovish UK/Japanese data

• USTs move higher this morning by around 7 ticks, currently trading within a 113-03 to 113-14 range. From a yield perspective, the 10yr is now eyeing the 4% mark (currently 4.025%), and trading at lows not seen since late Nov’25. Much of the upside can seemingly be attributed to the muted risk tone, in an environment clouded by geopolitical uncertainty, with US-Iran and US-Ukraine-Russia talks taking place. The former arguably holds added risk, given there is some chance that the US could strike Iran if talks break down – though analysts believe that the most likely outcome is not a full deal today but a decision to keep talks alive. (Full analysis piece can be found on the Newsquawk feed)
• Geopolitics aside, USTs have also followed peers higher. Overnight JGBs continued to rise on dovish Japanese GDP metrics. Thereafter, US paper took another leg higher following the UK’s jobs/wages metrics, where the unemployment rate ticked higher. (See JGB/Gilt piece for details).
• Danske Bank analysts see improving investor confidence related to the Fed’s independence, following the appointment of Kevin Warsh as the next Fed Chair, as another driver for UST demand.
• Bunds follow the global fixed income complex higher. In reaction to the UK’s jobs/wages data, Bunds spiked higher from 129.30 to 129.36. Currently trading higher by around 15 ticks and at the upper end of a 129.13 to 129.36 range – the 10yr yield is trading well outside recent ranges, around 2.733%. Further pressure could see the 10yr test 2.70%, which happens to be the trough from the 1st of December 2025. Markets await German/EZ ZEW shortly, and then a 2028 Schatz auction. On that, demand for German paper has been improving in recent auctions but remains tepid, failing to draw in a b/c over 2x.

The rise in UST prices reflects a risk-off sentiment influenced by geopolitical tensions and dovish economic data from Japan and the UK, which puts downward pressure on yields. This environment may suggest increased demand for safe-haven assets like USTs and Bunds, with factors such as the upcoming ZEW data and the appointment of the new Fed Chair enhancing market confidence.