Awaiting reports from the Middle East
Axios said something different. According to unofficial information from the Tehran portal, the offer for a peace agreement ending the conflict was improved, but Washington deemed it insufficient. Later that evening, D. Trump stated that after receiving a new peace proposal he had ordered the U.S. army not to carry out the planned attack on Iran tomorrow.
The U.S. president added: "I also ordered them to be ready to carry out a full, large-scale strike at any time if an acceptable agreement is not reached." The market finds it increasingly difficult to analyze the fragments of information coming from both official sources and media leaks.
The benchmark remains the behavior of crude oil. Brent pricing on the July contract has been above 110 USD/b since the start of European quotations. This favored high debt yields and sustained fears of rate hikes by central banks.
Only a mid-session correction on UST
Yesterday the yield of the U.S. curve moved in line with media reports about the U.S.-Iran war. In the afternoon the 10‑year UST fell to about 4.57% (open 4.61‑4.62%), ultimately closing near 4.60%.
Some investors clearly await information about a potential end to the conflict and the use of discounted securities to take long positions. However, the press leaks alone are only enough for a mid-session correction of the current trend. Ultimately, the change in yields at the main Treasury nodes was -2, +2 and +2 basis points to 4.07% (2Y), 4.61% (10Y) and 5.14% (30Y).
In the case of Bund, the session was slightly better, but it changes little in the overall perception of securities on the Old Continent. The German curve moved down, slightly tightening by 4, 2 and 1 basis points to 2.70% (2Y), 3.15% (10Y) and 3.67% (30Y).
External signals do not indicate a quick breakthrough in the Gulf. Geopolitical uncertainty will probably keep fuel prices near multi‑year highs, which also negatively affects debt valuation. The base scenario for the next hours remains trading near 4.60% on the 10Y UST.
Calming regional debt sentiment
The lack of new negative impulses from base markets stabilized CEE FI quotes. The yield on Czech securities rose by 2 basis points to 5.02% on the 10Y. The PLNIRS curve moved up by 2‑3 basis points. The ASW margin marginally decreased by 2 basis points on the long end. In the background, the NBP published core inflation dynamics. Excluding fuel and food it was 3.0% y/y and 0.9% m/m. Other measures also rose to around 3.0% with much lower monthly dynamics. This suggests that, at least for now, the spill‑over of higher fuel prices to the rest of the CPI basket is not particularly wide.
Ultimately, the change in yields at the main SPW nodes did not exceed 1 basis point, closing at 4.74% (2Y), 5.53% (5Y) and 6.01% (10Y – DS0436). After the sell‑off last week, global market impulses and geopolitical reports suggest the possibility of debt stabilization in the region. This should mean reduced pressure for further weakening of SPW and the potential to consolidate 10Y quotes near 6.00%.
EURUSD still in a narrow range
A draw‑down session on Wall Street and an attempt to generate a rebound on some leading markets supported currencies more sensitive to risk perception swings. The pound, which had recently been under pressure from domestic political uncertainty and external factors, gained. The dollar index marginally lost value, supporting EURUSD quotes (+0.3% to 1.1660).
We expect EURUSD to remain in the 1.16‑1.17 range. We anticipate a continuation of a regime in which the debt market takes on most external impulses, while the base FX remains relatively stable.
Euro near 4.24 PLN
A slight decline in risk aversion contributed to a marginal strengthening of the domestic currency. EURPLN around 4.25 moved to 4.24 (-0.2%). The forint appreciated slightly against the euro (0.3%) during a draw‑down session on the Czech koruna.
Similarly to base markets, we remain in a regime of compensating most impulses through debt instruments. Consequently, domestic FX is characterized by low volatility and the base scenario for EURPLN is trading in the 4.23‑4.25 range.
