OAT: Block trade

Houthi spokesperson: Important Statement by the Yemeni Armed Forces to Announce a Number of Military Operations Deep Inside Saudi Territory at Exactly 2:40 PM.

• At 12:40BST. 

Persistent Middle East tensions are maintaining a sticky geopolitical risk premium, establishing a firm floor under both BoE rate hike pricing and implied volatility. While 3M1Y has edged up this month, it remains relatively contained versus levels seen in March. Moreover, as implieds currently look fundamentally undervalued relative to peak SONIA curve pricing of ~100bp of hikes by next summer, any potential downside looks limited even if BoE rate expectations begin to unwind.

Core global FI markets find a base in recent trade as the bid in energy is pared.

• Little of note when it comes to macro headline flow.
• Pakistan’s military spokesperson has noted that a new defence agreement with Saudi Arabia and Turkiye will not affect Islamabad’s strategic relationship with Iran, describing the pact as defensive in nature and aimed at collective deterrence and regional stability. But we don’t see this headline flow as a gamechanger for energy markets.