[MARKET ANALYSIS] Yields jump as Trump "thinks" the ceasefire is over, poor German supply of note

Fixed income started on the backfoot, as benchmarks gradually moved lower as energy continued to move higher overnight given the US revoked Iran’s oil waiver and then conducted strikes on 80 Iranian targets in retaliation to Iran targeting various cargo vessels on Tuesday.
The early morning saw modest additional pressure, with Bunds and USTs lower by roughly 40 and five ticks, respectively, at first. The scheduled docket ahead featured supply and a few data points, but we were primarily awaiting comments from the US and/or Iran after the overnight action.
US President Trump then spoke in Ankara, in a relatively short but packed interview where he said the ceasefire with Iran is over “I think” and specifically on the MoU said, “think it is over”. An update that sparked a marked and continuing move higher in energy, with crude firmer by over 6% and Dutch TTF by over 5%. As such, yields across the curve have jumped, benefiting the short-end most, and curves are bear-flattening globally, though with the US belly faring almost the same as the short-end.
USTs down to a 108-29 base, lower by 13 ticks. We now look to the US 10yr note auction after Tuesday’s 3yr, and thereafter Fed Minutes for June, which will be scoured for further insight into how the first meeting led by Warsh went and how any discussions/disagreements among the board were presented; with particular reference to any mention around Warsh’s view on forward guidance. For reference, the 3yr tap was strong overall and continued the trend of robust front-end demand stateside.
Bunds went down to around 125.30 following the above energy action and Trump language, lower by over 80 ticks. Energy-related action aside, the main focus point was a dismal first tap of a 2036 Bund, drawing a b/c of just 1.03x. Results of this sent Bunds lower by nearly 10 ticks, to a 125.23 base.
Gilts opened lower by 57 ticks, acknowledging the US waiver removal yesterday and the tit-for-tat strikes overnight. Thereafter, as Trump spoke, further downside was seen, sending Gilts lower by 130 ticks in total to an 87.16 base. As usual, Gilts underperform amid periods of pronounced energy upside given the sensitivity of the UK market to global benchmarks.