With energy prices rising again, traders are worried about tightening policy from the European Central Bank

　　As Europe's leading measures of market inflation expectations continue to climb, the European Central Bank's future policy trade-offs have become more complex.

　　The threat of a strike at a gas plant in Australia has set off energy alarms in Europe, with bond traders worried about the European Central Bank stepping up its hawkish defense.

　　According to a Bloomberg article on Sunday local time, ING, Rabobank and Saxo Bank expect the ECB to turn hawkish as energy prices rise again, and said officials will prevent long-term inflation expectations from spiraling higher.

　　"All of a sudden, inflation alarms are sounding again," said ING senior rates strategist Gerhard Schroeder. The recent volatility in natural gas prices highlights the ongoing risk of supply disruptions to the more benign inflation dynamics of the recent past."

　　The next focus for markets is the European Central Bank's inflation expectations survey on Monday. Energy prices are currently haunting many markets in Europe, including gas-short Britain (GBR), which will report inflation data on Wednesday.

　　Despite ample supplies during the winter, gas prices in Europe are still four times higher than in the United States (USA) and double what they were before the pandemic. Long-term inflation expectations hit their highest level since 2010 last week due to soaring energy prices, which traders believe will make it difficult for the ECB to justify ending its tightening cycle.

　　Mr Schroder warned that the ECB was likely to become more hawkish in its defence to contain the risk of rising prices. He warned against jumping into curve-accelerating trades - bets that yields on long bonds will rise faster than those on short ones. He said markets should not underestimate the ECB's "determination and persistence."

　　Money markets are now pricing in a 40 per cent chance that the ECB will raise rates by 25 basis points in September, but cut rates by 66 basis points next year. Rabobank also said that given the risk of further upside energy shocks, the European Central Bank may need to show "greater resolve" to tackle inflation.

　　"Energy is really an important key issue for the ECB," said Graham Taylor, senior rates strategist at Rabobank. He prefers to focus the steepening trade in European bonds on the less policy-sensitive five - and 30-year yield curves rather than the two - and 10-year ones.

　　Spinozzi, senior fixed income strategist at Saxo Bank, said: "The ECB will keep rates on hold for a longer period of time to come rather than raise them further. She likes the short end of the policy-sensitive yield curve, which she expects to flatten by October."以上翻译结果来自有道神经网络翻译（YNMT）· 通用场景