[MARKET ANALYSIS] Fixed income benchmarks are slightly firmer across the board, returning as a place of safety amid tech worries

Global fixed income benchmarks are slightly firmer, as energy prices continue to pull back and investors seemingly return to see bonds as a haven following the recent tech sell-off. USTs (+2+ ticks) return to gains after pulling back from a 109-17+ top in Tuesday's session, currently trading at the top end of a 109-09+ to 109-15 range. The US data docket is light today, ahead of Thursday's busy day (PCE, GDP, initial jobless claims, durable goods). On the supply front, the US is to sell USD 70bln 5-year notes. The auction benefits from a combination of higher outright yields, reduced geopolitical uncertainty and a more hawkish Federal Reserve. The key question will be whether the improved backdrop can bring direct bidders back into the sector while maintaining the strong indirect demand seen at the previous auction. Bunds (+15 ticks) have been seen as attractive in recent sessions. Analysts see value in long-end German debt, with UBS stating that yields should be capped given any further hike by the ECB is expected to be quickly reversed as it would worsen the trade-off to growth, while rates strategists at Commerzbank say Bunds remain better supported as tech stocks struggle and worries of an AI-bubble. The German IFO data was mixed, with current conditions beating estimates while expectations came in soft; however, no move resulted. German 10yr yield has now returned to 2.90%, with Bunds currently trading at the top end of its 126.67-126.98 range. Gilts (+20 ticks) outperform, supported by the lower energy prices and the removal of some political risk premium after Starmer's chief secretary (and former chancellor) Jones said he will not contest against Burnham for the top job. Jones also thinks the bond market can be content with Burnham as PM. Analysts at ING see limited upward risk in terms of rates, but state that political uncertainties are likely to keep upward pressure on gilts, especially the longer end. UK 10yr gilts currently in a 89.33-89.64 range.