A broad risk-off move dominated Wednesday's session, with Brent crude remaining above $100/barrel amid reports of increased Iranian attacks on tankers crossing Hormuz. In the eurozone, concerns over France's fiscal situation deepened after comments from the Banque de France governor ruling out an ECB intervention.
Peripheral spreads widened on the news, particularly in France and Italy. German yields benefited from safe-haven flows, with the curve steepening as short-end yields fell. Investors' expectations for ECB hikes moderated as well, with just two more hikes priced in and the expected tightening cycle pushed further out.
Fed rate expectations also edged lower, with short-end Treasury yields declining. Short term, safe-haven sovereign debt benefited from the risk-off move, while precious metals fell. In FX, the euro depreciated, particularly against the dollar. Equities declined across the board, especially in the eurozone, where financials underperformed.
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