Fixed Income Morning Economic Report, 7-8-26

Fixed income markets started on the backfoot, as benchmarks gradually moved lower as energy continued to move higher overnight given the US revoked Iran’s oil waiver and then conducted strikes on 80 Iranian targets in retaliation to Iran targeting various cargo vessels on Tuesday, additional angst comes from Trump as he once again lashes out at NATO and mentions Greenland again.

The early morning saw modest additional pressure, with USTs lower by eleven ticks at 108-31+ having been in a 108-29 to 109-07+ range with SFRZ6 down four basis points at 95.93 having had a 95.965 to 95.92 range, back to implying an 84% chance of two hikes before year end.

The scheduled docket ahead featured supply and a few data points, but we were primarily awaiting comments from the US and/or Iran after the overnight action. US President Trump then spoke in Ankara, in a relatively short but packed interview where he said the ceasefire with Iran is over “I think” and specifically on the MoU said, “think it is over”. An update that sparked a marked and continuing move higher in energy, with crude firmer by over 6%. As such, yields across the curve have jumped, with curves bear-flattening globally, though with the US belly faring almost the same as the short-end. We now look to the US 10yr note auction after Tuesday’s 3yr, and thereafter Fed Minutes for June, which will be scoured for further insight into how the first meeting led by Warsh went and how any discussions/disagreements among the board were presented; with particular reference to any mention around Warsh’s view on forward guidance.

On the Docket today; 9:00 am Wholesale Inventories May 1:00 pm Minutes of Fed's June FOMC meeting 2:00 pm Consumer credit May