[MARKET ANALYSIS] Yields dip as the US and Iran agree to a framwork peace agreement

Global fixed benchmarks rise as the US and Iran agree to a framework peace deal, which has led to continued and sustained pressure in the crude complex. A full analysis piece can be found on the board, but in brief, the US and Iran have reached a framework peace agreement; the US will lift its naval blockade, and Iran will reopen the Strait of Hormuz. However, a full text has not yet been released, which has stemmed some uncertainty on a few key points. USTs (+10.5 ticks) are currently off the overnight highs, and trade within a 109-24+ to 111-00 range. Action which has been facilitated by the easing of inflationary implications associated with lower energy prices. From a yield perspective, there is a clear bull steepening. The US 2yr (4.03%) is eyeing the round 4.00% mark, but still remains well above the levels seen pre-Iran war (3.47%). The path yields take will be subject to: a) developments heading into Friday’s signing, b) the signing itself, c) the time it takes for stockpiles to be rebuilt. Finally, on Fed pricing, markets now assign a 65% chance of a hike by Dec’26 (vs the prev. fully priced by year-end). Bunds (+50 ticks) and Gilts (+57 ticks) both gain, thanks to the positive geopolitical updates; the latter outperforming a touch given the UK’s high reliance on external energy. This also comes ahead of the BoE policy decision this Thursday, where rates are expected to remain on hold – the latest geopolitical updates will only further cement that decision.