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[MARKET ANALYSIS] Yields climb as energy benchmarks soar, sparking a hawkish move in central bank pricing

Newsquawk Staff ·

  • A bearish start to the week for benchmarks as yields react to energy prices. See the 08:25GMT update for a full geopolitical brief, but in brief, the ongoing Middle East conflict, supply/production disruptions, and no clear signs that the US or Iran are set to back down have lifted crude to above USD 100/bbl, a level not seen since 2022.
  • This saw USTs begin the week with losses of nearly 20 ticks, Bunds down by over 90 ticks and Gilts gapping lower by 119 ticks at a 88.80 trough, just above the 88.52 contract base.
  • For the UK, the move lifted the 10yr yield to a 4.78% peak, the highest since October 2025 and takes us back to the September 2025 peak of 4.86%. Action that has seen a marked shift in BoE repricing, with markets implying around a 70% chance of a hike by the end of 2025; a marked shift from mid-February, when two cuts were essentially priced. Note, this move will likely moderate as while easing is likely off the cards in the near-term, the UK's job market situation does not support tightening in the near term.
  • Back to USTs, the benchmark is lower by around 15 ticks as it stands, just off a 111-26+ base. The day ahead is focused entirely on energy, with a G7-IEA meeting expected at 12:30GMT to discuss a potential strategic release.
  • For Bunds, they are also off worst and by quite some way. Down by around 25 ticks currently, but around 70 off a 125.94 trough. A moderation that has perhaps come as the benchmark finds some modest haven allure given the broader risk tone. Additionally, a rethinking of ECB pricing from the knee-jerk this morning may be factoring; at most, markets priced in two 25bps hikes by the ECB in 2026.

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