IRAN: Telegraph: US and Israel Discussing Land Blockade Of Iran

More measured commentary from usually hawkish ECB’s Wunsch (albeit similar to comments seen on Tuesday) and a downtick in oil prices allowed EGBs to recover from lows.

• Spillover from month-/quarter-end selling in Tsys and gilt weakness had weighed.
• Initial dovish extension on the slightly lower-than-expected headline Eurozone HICP print quickly faded with market already skewed in that direction in the wake of the national level readings previously released.
• Bund futures based at 127.00, leaving initial support at 126.80 untested. Bulls remain in technical control; resistance located at yesterday’s high (127.69).
• German yield curve twist steepens, benchmarks -0.5bp to +3.0bp.
• EGB spreads to Bunds widen at the margin with most European equity indices a touch lower/factoring in the late NY selling in Tsys.
• ECB-dated OIS pricing 22.5bp of tightening through year-end vs. 24bp late yesterday.
• Meanwhile, gilts widen by ~1bp vs. Bunds given their beta to Treasuries and reports suggesting that outgoing PM Starmer’s defence spending plan has generated a GBP4.7bln funding gap.
• Futures traded to the lowest level seen since June 22, breaking the 20-day EMA (88.85), with bears now focusing on the June 22 low (88.30). Contract then recovered to ~88.95. Bulls remain in short-term technical control despite the pullback from June highs.
• Yields little changed to 4bp higher, curve bear steepens, indicative of increased fiscal pressure/risk. 5s30s nears 120bp, a level not breached since June 16.
• Much of today’s regional focus will fall on the panel appearance from CB heads Warsh, Lagarde, Bailey & Macklem (14:00 London).

Reuters reports comments from an unnamed senior Iranian official, claiming "Indirect negotiations with the US that started on Tuesday night in Doha continue," adding "Indirect negotiations with the US in Doha are focused on the release of Tehran's funds and the Strait of Hormuz". 

• The Qatari Foreign Ministry noted on 29 June, ahead of the talks, that “The issue of the frozen funds is linked to the progress of negotiations between Washington and Tehran,” the ministry said, adding that any transfer would require agreement by both parties." Iran's ISNA reported that President Masoud Pezeshkian has claimed that “Based on the plans made, USD6 billion out of a total of USD12 billion of Iran’s funds in Qatar should be released and returned to the country.”
• Both the US and Iran have talked up their negotiating positions going into the technical talks, but there appears to be little sign of headway being made. Indeed, on the Strait, the US continues to claim the route is open, while Iran demands both payments for transit and the use of only its approved corridors. It is also unclear if or how a de-mining effort will take place, with Iran and the US both claiming they will carry it out, while France has offered its assistance (roundly rejected by Iran).