[MARKET ANALYSIS] Core fixed bid on haven allure and with growth implications in focus, however, OATs lag with the spread to Germany over 170bps

In brief, a haven bid is seen across most core fixed income, as the geopolitical situation escalates and yields prove somewhat resilient to the energy upside, as much of that is priced by this stage, with focus instead increasingly on the growth side of the equation. USTs just off a 105-19+ peak, firmer by 15 ticks at best. The docket ahead is relatively light, but the focus is firmly on geopolitics after the activity seen in APAC hours and the continued dissemination of punchy rhetoric in the European morning. Bunds also bid, and in-fitting with USTs for the most part. At a 121.90 high, firmer by 50 ticks. As above, specifics are relatively light and the focus is firmly on geopolitical developments for core counterparts. In brief, while the focus for core debt is increasingly on the growth implications of the ongoing Middle East situation, this is not to a degree that is likely to dissuade policymakers from tightening in the weeks ahead, with the BoE for instance expected to start its tightening cycle; though, it is expected to be brief. Continuing with the UK, Gilts opened with modest gains, given the above haven allure factoring initially, before then being briefly unwound/offset by energy’s influence. However, Gilts broadly conform to peers, with gains of around 15 ticks currently, some 10 off the 84.73 peak. More pertinently, those under significant fiscal scrutiny are seeing a selloff as the growth-hit and inflationary angle combine to further knock the fiscal backdrop. A point that is particularly evident in France, with OATs down by over a point at most, lifting the 10yr yield to a 5.14% high, and widening the OAT-Bund spread to 1.73%, the highest since January 2011.