U.S. Indices closed positive on Wednesday but off the earlier peaks, with oil prices falling while T-notes rose across the curve. The driver of price action was the reported progress in moving to peace in the US/Iran war after the US sent a 15-point peace plan and ceasefire proposal to Iran. However, the optimism did fade as Iran said it did not accept the proposal and gave in turn its own demands. Nonetheless, the US still said they are still awaiting Iran’s response, while Iran’s foreign minister toed the line that no talks with the US are ongoing, but the US is sending messages through different mediators, noting that an exchange of messages via mediators does not mean negotiation. It is still a fluid situation amid the conflicting reports between both sides, but the market has taken it as a step in the right direction at least. Treasury yields were lower across the curve, particularly in the long-end, with price action dictated by energy prices. The 5-year note auction was soft, adding to the weakness seen in recent auctions, particularly the front-end and belly offerings. The Dollar outperformed despite the move lower in yields and downside in crude. The Australian Dollar was hit by soft Aussie inflation overnight. Gold and Silver were bid, as was Bitcoin. Aside from geopolitics, US import and export prices were hot but had little market impact while Fed’s Barr expects to hold Interest Rates steady for some time and wants to see evidence of a sustainable inflation retreat. Goolsbee warned energy shocks pose risks to both sides of the mandate, and he does not know if the Fed can cut rates again as it depends on how long the war lasts. The February Import prices rose 1.3% M/M, above the 0.5% forecast and accelerating from the prior 0.2%. It was also above the highest analyst forecast of 0.9%. Import prices Y/Y rose 1.3% (prev. -0.1%). Export prices rose 1.5% M/M, above the 0.5% forecast and 0.6% prior, but was within the analyst forecast range of 0.2-2.0%. Oxford Economics highlights “The largest rises were concentrated in fuel, industrial supplies, and capital goods import prices, reflecting elevated global oil prices and strength in business investment related to AI demand.” In terms of price implications, OxEco says that “While headline inflation will be pushed higher by fuel prices this year, we expect the pass-through to core prices will be muted. We expect core inflation to average 2.8% in 2026, and while this is still above target, it should be contained enough to allow the Federal Reserve to stay focused on risks to the labour market.” Elsewhere, Oil closed higher by 2% while Gold ended Wednesday’s session with a 1.40% gain.
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