[MARKET ANALYSIS] OATs underperform after a weekend of unrest and ahead of Moody's on Friday

USTs are modestly firmer, benefitting from the downside seen in energy on the updates between the US and Russia over the weekend. Otherwise, the fixed income space is under pressure given civil unrest in Europe. For USTs, they are at the low end of a 105-18+ to 105-19 band, but still post upside of c. five ticks as things stand. As alluded to, US President Trump said that he is negotiating a Ukraine-Russia peace, and significant progress is being made. Additionally, he signed an executive order waving sanctions and tariffs on Russian energy. Points that have weighed on the energy space. Ahead, aside from updates to those points and expected continued bipartisan criticism, the US docket is very thin today, with participants still digesting last week’s price prints ahead of the PCE print towards month end. EGBs in focus, and particular OATs. Currently, at a 108.96 low, hit by over 70 ticks after the significant protest activity seen across France during the weekend, and widespread political dispute over it, all largely to the benefit of Le Pen’s RN. Action that has taken the OAT-Bund 10yr yield spread to a 144bps peak today, just shy of the recent 151bps peak. A widening and unrest that adds to pressure into Moody’s review on Friday. Protest activity also occurred outside of France, with Italy seeing notable activity, enough to weigh on BTPs by around 25 ticks, with the BTP-Bund spread also modestly wider. Gilts opened on the backfoot, despite the energy pullback, as the region has similar fiscal/dissatisfaction themes that sparked the unrest seen in mainland Europe, and thus some spillover selling has occurred. Enough, as it stands, to send Gilts to an 84.29 low, off by just under 50 ticks.