AFS Markets Blog: Midday 02/11/2026

• Meanwhile in markets, energy prices may have finally succumbed to gravity, but that has failed to trigger a significant bid for bonds. With Brent crude futures sliding nearly eight percent from Friday’s close, a meager 1–2bps dip in UST and Bund yields offers little to cheer about;

• Notably, 2-year yields – the tenor bearing the brunt of the energy shock – are holding completely flat at Friday’s levels in both the US and Germany. It is not just crude either: both European gas and diesel prices are down this morning, albeit by a more contained 4 percent. The decline follows reporting by Axios that, during a call with Prime Minister Netanyahu over the weekend, President Trump shared his preference to give diplomacy a chance after the midterms rather than launch immediate strikes against Iran;

• Iranian headlines this morning suggest the recent letter from Vice President Vance hasn’t budged Tehran’s bottom line: negotiations for a comprehensive deal won’t resume until the US ends its naval blockade and meets further demands. Still, there is real positive news, as Al Jazeera reported that a draft proposal to end the war is being circulated for feedback following a recent exchange of messages between the US and Iran in Qatar. A follow-up meeting is being planned, while Iran has stated that, should its demands be met, comprehensive negotiations could begin a week later;

• In our neck of the woods, Le Spread stands at 163bps at pixel time, two basis points lower than Friday’s close. French sovereign bonds appear unfazed by Fitch’s unscheduled decision on Friday to revise the outlook on OATs to negative from stable. While the rating was affirmed at A+, the negative outlook reflects mounting concerns over deteriorating public finances and the parliamentary deadlock surrounding the budget;

• Across the border in Belgium, where a similar budget crisis led PM Bart De Wever to tender his resignation to the King this morning. After a discussion lasting nearly an hour and a half, the King has chosen not to accept the resignation immediately, instead taking it into consideration for the time being. The King will now consult with the other party leaders on the way forward. Budget negotiations will continue for now, with the resignation serving as a last-ditch pressure move to try to secure an austerity budget;

• Despite the political turmoil the Belgian OLO-Bund spread has barely moved this morning – OLOs are actually mirroring the moves in Bunds across the curve this morning. The fiscal turmoil in Belgium mirrors that of France in many ways. Belgium’s debt-to-GDP ratio sits just a hair below France’s, and the IMF forecasts a headline deficit of 5.3 percent of GDP in 2026 – in line with France. No surprise that after France, Belgium is the core Eurozone nation whose Bund spread has widened the most over the past months. PM De Wever is set to meet the King again this Friday to see whether this effort bears any fruit – and if it doesn’t, new elections will likely be on the menu;

• Moving to broader market commentary, EURUSD is up half a cent this morning, trading at 1.121. At pixel time, EURCHF is hovering just below the 0.92 handle. In equities, both the Euro Stoxx 50 and S&P 500 futures are up half a percent this morning.

• Looking ahead, we have the release of the US ISM manufacturing PMI this afternoon, which should point to a relatively stable expansion in the manufacturing sector last month. Tomorrow, eyes will be on the US midterms – although results will only start coming in after the markets close. During the session, we will be treated to plenty of ECB-speak, alongside detailed US job openings data as a taster for Friday’s labor market report.

‍