[MARKET ANALYSIS] USTs move higher whilst Bunds and Gilts are pressured by elevated energy prices

Global fixed benchmarks are mixed. USTs (+2+ ticks) hold afloat, whilst Bunds (-14 ticks) and Gilts (-11 ticks) have been pressured by another bout of strength in the energy complex. For reference, energy benchmarks are moving higher on a) postponement of Iran-Gulf talks on the Strait and b) Saudi shutting a key pipeline. USTs remain firmer this morning, and currently hold within a 106-03 to 106-10+ range. Strength which comes despite sell-side banks boosting their bets of a hike this week, and higher energy prices. Some may opine that recent pressure in US benchmarks may be overdone, and near-term prices offer buyers a good entry point. Nonetheless, the environment is clouded by fiscal and geopolitical uncertainty. This is made evident by sustained elevated yields; the US 10-year (4.96%) trades just shy of the 5.00% mark, and a hawkish Fed mid-week will likely see it top that mark. Bunds and Gilts have been pressured throughout the European morning as energy benchmarks gradually picked up. Gilts are pressured given their high dependency on external energy, and as traders eye the BoE this week. A slew of key data will be released this week, with UK CPI due on Wednesday. A hot print mid-week could persuade some MPC members to vote for a hike on Thursday; expectations for the vote split currently hold at 6-3. BTPs have steadily fallen throughout the morning and are currently at the lower end of their 111.96-112.57 range. After-hours on Friday, Fitch affirmed Italy at 'BBB+'; outlook stable. The credit agency commented that the "continued increase in public debt/GDP over the medium term" is a risk that could result in a downgrade. Regarding the upcoming elections, Fitch observed that the "recent political stability has been a positive anchor for Italy's sovereign rating", and that the law to switch the proportional electoral system could favour a stable government.