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[MARKET ANALYSIS] Yields followed energy higher overnight, the fixed complex now awaits a busy afternoon

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Korea's NPS has lifted its domestic stock weight target to 20.8% (prev. 14.9%), Bloomberg reports

Italy sells EUR 7.25bln vs exp. EUR 6-7.25bln 3.15% 2031, 3.80% 2036, 2.25% 2036 BTP and EUR 3.75bln vs exp. EUR 2.5-3.75bln 3.237% 2036, 3.237% 2035 CCTeu

[MARKET ANALYSIS] Yields followed energy higher overnight, the fixed complex now awaits a busy afternoon

UK sells GBP 1bln 0.375% 2030 Gilt via tender: b/c 4.19x (prev. 2.97x), average yield 4.277% (prev. 3.796%)

XPeng (XPEV) Q1 2026 (CNY) Adj. EPS -1.76 (prev. -0.45 Y/Y), Revenue 13bln (prev. 15.8bln Y/Y); guides Q2 rev. 19.6-20.20.8bln

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  • A softer start to the day for fixed benchmarks, as the energy space reacts to renewed strikes from both the US and Iran. Bunds and USTs hit lows overnight, with downside of c. 45 and 12 ticks respectively. Since, the space has lifted off worst levels as the intensity of newsflow slows and energy eases from best. However, the space remains in the red heading into a relatively busy session, particularly in the US.
  • Bunds hit a 125.53 low overnight, reacting to the US and Iran action, and also as the language from US President Trump regarding Oman got greater attention. The intensity of newsflow has since slowed, and Bunds have managed to lift off lows but remain in the red by a handful of ticks.
  • Today's European docket has several ECB officials and the April Minutes. From the officials, any remarks which decrease/increase the odds of a June move will, of course, be eyed. Similarly, from the Minutes, insight into how broad the discussion was around tightening and while the decision was unanimous for a hold, did any member(s) initially express a preference for taking action at that point.
  • Gilts gapped lower by 35 ticks, taking out the trough from Tuesday at 87.99 and as such notching a new WTD low. Though, one that remains comfortably clear of last week's 84.96 contract base. For the UK newsflow remains relatively light as we count down to the mid-June by-election, after which the Labour leadership contest will step up a gear, irrespective of the result.
  • USTs in-fitting with Bunds. Notched a 109-17+ base overnight, and has lifted a 109-29 high, to unchanged on the session. The US docket ahead is packed with multiple Fed officials, whose remarks will continue to be scrutinised for insight into what the outcome of the first meeting under Warsh will be. Additionally, April's PCE is seen ticking higher to 3.8% Y/Y (prev. 3.5%), but moderating to 0.5% M/M (prev. 0.7%).
  • Elsewhere, JGBs gapped lower by 14 ticks overnight before making a recovery to a 128.77 peak with gains of over 20 ticks at one point. A rebound that potentially continues to be driven by the Post Bank remarks earlier in the week, after the President said they would continue to purchase JGBs in the current FY. A point of note, given the firm's history of JGBs holdings and a possible reversal of the reduction in their holdings seen in recent years.
  • Finally, Bonos continue to underperform European peers, given the scrutiny around PM Sanchez.

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