• Meanwhile in markets, there ain’t no Wednesday like one following a TACO Tuesday. The two-week ceasefire between the US, Israel and Iran – and the seemingly imminent reopening of the Strait of Hormuz – has sent equities and bonds rallying like there’s no tomorrow;

• In our neck of the woods, Bund yields have slumped 8–23bps in a bull-steepening pattern. Yields for 2- to 10-year Bunds are now at their lowest point since mid-March – just before the escalatory Israeli strikes against Iran’s South Pars gas field. The rally is less pronounced in the US – where Treasury yields are down 2–7bps – though UST yields have also hit their lowest levels since mid-March;

• The bond rally is tracking a sharp drop in central bank rate expectations. For our Frankfurt overlords, ESTR forwards now price a mere 8bps hike at the end of the month. Punters still fully price a June hike by the ECB, but only two hikes are now expected in 2026 – down from three yesterday. Across the Atlantic, Fed funds futures price a single 15 bps cut by year-end;

• Energy prices, which fueled the recent surge in inflation, plummeted following the ceasefire. Brent crude is now below $95 a barrel for the first time since early March, down $15 since yesterday. A return to the $60 levels seen in January seems unlikely anytime soon – January 2027 Brent futures are still trading at $76. European natural gas hit €44/MWh – the lowest since the second day of the war. While that is a relief – for my wallet at least – natgas prices are still up 50 percent YTD;

• Shifting to equities, the Stoxx 50 is up nearly five percent today and reaching its highest level since the first week of the war, though it remains about five percent below its pre-war highs. Unsurprisingly, the travel and leisure sector is the session's biggest winner, with the Stoxx 600 T&L subindex up over seven percent. What is surprising is that the sector has essentially erased all losses stemming from Trump’s ‘Special Military Excursion’ in a single morning. Over in the US, S&P 500 futures are up two and a half percent today, putting the index three percent below its pre-war highs;

• Moving to forex markets, the dollar is down over a percent against major currencies today, although its losses against emerging markets remain contained at less than a quarter of a percent. EURUSD has rallied to 1.168 and is testing its 50-DMA at that level. The Swiss franc’s gains continue to stand out. EURCHF has now dropped by over half a cent today and USDCHF dropped by a full cent;

• Looking ahead, the only item of note today is the release of the March FOMC minutes. Predictably, we will be closely watching whether the ceasefire holds. We have seen Iranian reports of explosions of an unclear – don’t misread that as nuclear – origin on their territory, but so far markets have ignored those reports;

• Focus will turn to US CPI on Friday, and then over the weekend Hungary’s parliamentary elections. The opposition Tisza party leads President Orbán’s Fidesz by 10 percentage points in Politico’s polling average. Hungarian bonds have rallied hard now an opposition victory seems within grasp, with 10-year yields down nearly 50 bps in the past week. But a victory at the ballot box is only half the battle. The question remains: will the EU’s strongman actually go quietly if he loses on Sunday?

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