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According to Pooja Kumra from TD Securities, the sharp decline in oil prices has reduced investors' expectations for interest rate hikes by the Bank of England in the coming months. Data from the London Stock Exchange Group shows that the market is currently pricing in a total of 26 basis points of rate hikes by the Bank of England by 2026. After the United States reached a peace agreement with Iran, Brent crude prices fell from about $95 per barrel a week ago to around $79.5.

The spread between the 5-year and 30-year US Treasury yields climbed again to 79 basis points on Wednesday before pulling back, with key resistance at the 79.5 and 80 basis point levels continuing to exert valid pressure.This spread dropped to a recent low of 73 basis points on June 11, with the bottom support level formed in June around 70 basis points. The current rebound is testing these key resistance areas above.This week, the 5-year yield formed a double-bottom low at 4.14%, with the previous low at 4.12% on May 29; the 30-year yield fell intraday to 4.92%, after reaching a low of 4.91% on May 7, and there is a dense trading range near 4.90%.The market is maintaining a wait-and-see stance ahead of the Federal Reserve decision. The spread’s movement is restricted by policy uncertainty—if it breaks through 80 basis points, it may trigger stop-loss buy orders, but the wording of the decision will determine the subsequent direction.

⑴ Spain will auction 7-year, 10-year, and 14-year government bonds on Thursday, with a total scale of about 5 to 6 billion euros. The current index dynamics are favorable and demand for Spanish government bond auctions has historically been strong. ⑵ This month, about 74 billion euros of eurozone government bonds have flowed out from major bond indices, slightly below the monthly average of 75 billion euros so far this year. At the end of the month, investors will reallocate the proceeds from these sales, providing support for auctions by various eurozone issuers. ⑶ Spanish auctions usually perform well, due to reasons such as the higher value of green shoe options amid current market volatility, the relatively insufficient liquidity in Spain’s secondary market making auctions an important channel to buy bonds, and Spanish government bonds serving as alternatives to similar-yielding bonds from other countries that are issued less frequently. ⑷ Demand for the 14-year variety is expected to come from scarcity in some parts of the market, and combined with the issuer’s ability to allocate bonds, this auction is likely to receive strong subscription.