Natural Gas Price Surge Sets Off Eurozone Inflation Alarm Bells
Natural gas has become Europe's new inflation flashpoint as prices edge towards five-month highs and storage levels reach a five-year low for this time of year.
The Dutch TTF natural gas price has risen from around €32 per megawatt-hour at the end of February to €64, roughly double its level a year earlier.
Bond investors and policymakers are shifting their primary concerns from oil to natural gas due to the transmission of natural gas price shocks to inflation in the eurozone and UK being far greater than that of oil.
Jamie Searle, a European rates strategist at Citi, said: 'Natural gas prices have now taken over as the key driver of yields.'
The phasing out of fiscal support measures is also contributing to the surge in energy inflation, with European countries having pledged €118 billion in measures to address the energy shock.