[MARKET ANALYSIS] Fixed income falters marginally after last night's energy upside and into the FOMC

Fixed income is under modest pressure, with USTs lower by a handful of ticks, Bunds by around 15 and Gilts somewhere between. The macro focus has been firmly on geopolitics as the IRGC targeted US forces and the US retaliated, in addition to the busy morning of earnings. Bunds lifted marginally on a notable pullback in Y/Y German import prices for June, though the move proved fleeting in nature. Once again, intermediate goods and energy import prices drove the 6.1% Y/Y (prev. 6.8%) read. No move to the ECB wage tracker; the annual ticked up slightly for 2026 to 2.301% (prev. 2.281%), with modest upward revisions across the quarterly readings as well. The uptick is perhaps unsurprising given the month’s energy strength, but the ECB will welcome that the move was modest in nature and thus does not speak to second-round effects. Currently, Bunds are just off a 124.95 low, under pressure but holding above Tuesday’s 124.93 base and, by extension, the WTD low at 124.77. The space now looks to supply, with a German 2036 tap due shortly. Gilts opened lower by 16 ticks and have since slipped another 12 to an 87.08 base, taking out Tuesday’s trough but holding clear of the figure and by extension Monday’s 86.83 low. Specifics for the UK are somewhat light, with the space instead moving in tandem with peers given the modest energy bid after last night’s resumption of strikes. Elsewhere, USTs are under pressure by a few ticks, though comfortably above lows from the last two days at 108-15+ and 108-12+ respectively. Softer given the energy upside and associated yield moves. More generally, we look to this evening’s FOMC. Where a hold is expected, but the risks are hawkish in nature given recent energy action; currently markets imply around a 30-35% chance of a hike. Full Newsquawk preview is available.