[MARKET ANALYSIS] Yields slip off best levels as energy benchmarks edge lower; JGBs in focus following a GPIF meeting and BoJ sources

Global fixed income benchmarks are firmer this morning, rebounding from recent losses as the yield situation attempts to improve. USTs (+6 ticks) are stronger this morning, holding at the top end of a 107-15+ to 107-21 range. Elsewhere, Bunds (+20 ticks) and Gilts (+45 ticks) benefit from cooling energy prices. The geopolitical situation remains tense; however, focus has been on comments from President Trump. He stated that their renewed campaign against Iran will not continue for too long. Separately, the WSJ reported that Trump is said to be having discussions with senior aides regarding whether to call the Iran war over – the piece suggests he is favouring the idea. US yields have moved off their multi-year peaks, with the 10yr (4.76%) holding off the 4.81% high made on Wednesday. A confident breach beneath the 4.75% mark would likely require significant progress on the Middle East situation and/or dovish data. On that note, US Challenger Layoffs (Aug), Trade Balance (Jul), Jobless Claims, ISM Services PMI (Aug) are on the docket. JGBs (+40 ticks) are firmer this morning, with an accumulation of factors helping sentiment for the region. As mentioned earlier, oil prices are helping global yields lower; focus has also been on a surprise GPIF management committee, which Bloomberg opined has helped raise speculation that it may raise its 25% domestic bond allocation target. On the monetary policy front, money markets have continued to up their bets of a BoJ rate hike this month. This was further corroborated by a Bloomberg sources piece earlier, which highlighted that the Bank is favouring a 25bps hike and a flexible future pace. Elsewhere, a 30-year auction overnight was relatively well received, further boding well for the benchmark. Bunds and Gilts follow the bullish bias, benefiting from lower oil prices. Most recently, constructive comments from Russian President Putin spurred another bout of pressure in the oil complex – which in turn helped to lift the fixed income space. He stated that there is an opportunity to reach a peace agreement with Ukraine, adding that there are contacts with them. Bunds (U26) jumped c. 10 ticks to make a fresh peak at 122.95.