[MARKET ANALYSIS] USTs are flat, whilst Bunds and Gilts are pressure by elevated gas prices

Global fixed benchmarks are mixed this morning. USTs (U/C) are flat, whilst Bunds (-40 ticks) and Gilts (-44 ticks) extend on recent pressure. Whilst USTs appear to be taking a breather following the recent downside, Bunds and Gilts continue to be subject to hefty selling, amidst higher energy prices and ongoing fears surrounding fiscal/debt sustainability. USTs currently hold within a 107-09 to 107-14 range. For the short-end, focus will no doubt be on key domestic data which will help decide between whether the Fed opts to hold or hike at its September meeting. The US Jobs Report is due this Friday, and the CPI late next week; a hot report on both fronts will likely see money markets extend their bets of a hike this month (currently seen at 68%). The US yield curve is ever-so-slightly steeper this morning. The US10yr (4.80%) remains at elevated levels, with focus on whether it can move towards the 5.00% mark. That would likely require a significant escalation on the geopolitical front and/or hawkish NFP/CPI reports to cement a September move. Even if that does not come to fruition, the 10yr may remain above the 4.75% mark until the geopolitical situation materially improves. Bunds and Gilts are ultimately pressured by elevated European gas prices, which are the highest in three years. There has been a lack of material newsflow dictating price action this morning, with only ECB’s Makhlouf and Nagel on the wires. The former said that the ECB should be ready to lift rates further, adding that inflation and growth metrics make him “uneasy”. For Gilts, the first PMQs under PM Burnham draws focus, for potential updates on the cost of living, fiscal space and other key themes. On the trade front, the US is reportedly preparing to launch its investigation under Section 301 into EU countries for unfair trade practices, the Times reports. The report added that the UK will not be on the list of countries subject to investigation.