ABN AMRO\u2019s Larissa de Barros Fritz sets out how different oil and gas shocks can affect ECB rate expectations and German Bund yields. She separates demand-driven oil shocks, speculative inventory moves, oil supply disruptions, and gas supply shocks.<\/p>\n
Demand-driven oil shocks push rates sharply higher, while inventory-driven oil shocks can lead to flight-to-quality buying and lower yields. Oil supply shocks lift inflation and ECB expectations, but weaker growth can limit rises in longer-dated yields.<\/p>\n
Gas supply shocks are described as more inflationary and longer lasting than oil shocks, leading to a growing \u201cgas premium\u201d in Bund yields over time. Bund yields may react only weakly, or fall slightly at first, because inflation passes through slowly, before rising in a sustained way at both short and long maturities.<\/p>\n
The note says current conditions point to an oil-led supply shock, with short-term bear-flattening. It then outlines the possibility of bear-steepening later as gas-related inflation builds.<\/p>\n
Given the recent supply disruptions that have pushed Brent crude above $95 a barrel for the first time since late 2025, we are clearly in an oil-led supply shock environment. This is already reflected in the latest February 2026 Eurozone HICP data, which showed an unexpected uptick in the energy component. The market is now pricing in a more hawkish European Central Bank in the immediate future.<\/p>\n
This dynamic strongly suggests a bear-flattening of the German Bund yield curve in the near term. We expect short-term yields to rise more sharply than long-term yields as the market digests immediate inflation risks, while growth concerns cap the long end. Derivative traders should consider establishing curve flattener positions, for instance by selling 2-year Bobl futures and buying 10-year Bund futures.<\/p>\n
However, we must remember the lessons from the 2022 energy crisis, where gas supply shocks created a more persistent inflation wave. Dutch TTF gas futures are already creeping up past \u20ac55\/MWh, indicating that a secondary, gas-driven price shock could be slowly building. This “gas premium” has historically embedded itself into Bund yields with a time lag.<\/p>\n
Therefore, as this stickier gas-related inflation starts to filter through the economy over the next month or two, the yield curve dynamic is likely to shift. We should be prepared for a pivot towards a bear-steepening environment, where longer-term inflation fears start to outweigh short-term rate hike expectations. This would be the time to unwind flatteners and position for long-end yields to rise more quickly.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" ABN AMRO explains how oil and gas shocks shift ECB rate expectations and German Bund yields dynamics.<\/p>\n","protected":false},"author":103,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-51734","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t