Long end UST above 5.00%
For 30‑year US securities, the yield tested 5.03% (the highest in just under a year). The same was true in the Old Continent. Ultimately, the main US curve moved up at the key nodes, flattening marginally by 7, 6 and 5 basis points to 3.95% (2Y), 4.45% (10Y) and 5.02% (30). For Bunds, the yield change was +6, +4 and +3 basis points to 2.72% (2Y), 3.08% (10Y) and 3.58% (30Y).
Initial quotes in Europe are forming around the middle of the UST curve near yesterday’s closing levels. We assess that the market will now look at events in the Gulf in a two‑way manner. Losses can be recovered in both a de‑escalation scenario and an effective clearing of the Strait of Hormuz by the US navy.
Only a superficial calm in the region
CEE securities managed to recover part of the intraday losses and the close on the long end fell close to the end of trading last week. Czech bonds saw yields rise by 2 basis points to 4.89% on the 10Y. Little happened on domestic instruments as well.
The PLNIRS curve ended flat. The ASW spread rose slightly by 2 basis points to 100 basis points on the 10Y. Overall, the yield change on the main SPW nodes was 0, +3 and +2 basis points to 4.59% (2Y), 5.38% (5Y) and 5.76% (10Y).
Base market impulses remained negative in the evening and during today’s Asian session. This may put pressure on domestic bonds and there is a risk of the SPW long end testing the 5.80% area.
JPN falls off the agenda
Yesterday on the base FX, impulses from energy commodities returned. Rising oil prices negatively affected the euro’s valuation and pushed EURUSD below 1.1700 (closing at 1.1690 after a 0.3% drop). The session on the franc and the Swiss franc was calm, which in their relation to the euro meant a tie at close. The EURJPY valuation fell slightly (0.2%), which, compared to last week’s volatility, represents a clear calming of sentiment.
The ongoing relationships from recent weeks will remain in force. The weight from Gulf events is taken over by debt markets, which translates into relative stability of EURUSD. Consequently, we do not expect large moves in the pair in the coming hours.
Light weakening of CEE FX
Contrary to our expectations, we observed yesterday a slightly higher downward pressure on the zloty. EURPLN moved from around 4.25 to 4.26 (+0.3% on a daily basis). The risk aversion increase was also seen with the forint, pushing EURHUF up 0.6%.
The Czech koruna remained the most stable, weakening against the euro by 0.1%. Despite Monday’s zloty weakness, we do not expect this move to continue in the coming days. We rather anticipate a return to a more familiar market regime – the debt market taking on the weight of negative external impulses and thus stabilising EURPLN.
