[MARKET ANALYSIS] Yields climb as energy lifts, OATs and Gilts lag.

A bearish start to the day, as renewed energy upside lifted fixed income overnight. Magnitudes are in-fitting with Tuesday’s action, in the sense that OATs outperformed yesterday and currently underperform today. Within Europe, for today, the focus is more on Germany into the CDU/CSU-SPD coalition meeting at around 15:30BST today. A meeting that is in focus after Bild reported that the Grand Coalition is looking to get agreement from SPD to outline a deadline for pension reform. In general, EGBs are under pressure given the energy move. Bunds lower by about 10 ticks in 120.45-90 parameters, while OATs underperform at a 108.86 low, down by essentially a full point. A move for OATs that has unwound all of yesterday’s upside, and thus the OAT-Bund 10yr yield spread is wider today, at 138bps currently. Ex-OATs, Gilts are underperforming. Hit by the mentioned energy move and the usual somewhat outsized reaction seen in Gilts to this. Additionally, fresh budget speculation regarding energy relief is factoring; while welcome for consumers, it adds to the funding pressure that Chancellor Healey is already under. Lower by 55 ticks at the time of writing. Finally, USTs conform to the energy-driven move, with US yields extending as energy picks up across the morning, to the benefit of the USD and detriment of the general risk tone. At the lower-end of 104-07+ to 104-15+ parameters, with the yield curve bear-steepening. Ahead, FOMC Minutes and a 10yr auction dominate the docket.