The crisis has left the EU at the mercy of the weather and Vladimir Putin’s wiles. Natural gas storage sites are only 56% full, more than 15 percentage points below the 10-year average. Russia is building troops on the border with Ukraine. The energy situation limits the scope of actions Western powers can take to counter Russian aggression.

European prompt power prices on Monday notched up sharp gains as German day-ahead wind power supply was seen halving while demand rose due to falling temperatures. German week-ahead baseload jumped 76% to €211.2/MWh. German front-year power and the equivalent French contract were at 111 euros and 124.5 euros on Dec. 31.

The country installed only 1.65 GW. To meet the government's targets, Germany would have to add 9.8 GW of solar and 5.9 GW of onshore wind annually. To secure its supply, Germany could be tempted to build more gas-fired power stations, but this risks reinforcing its dependence on Russia, as illustrated by the controversial Nord Stream 2 gas pipeline.

France risks falling short of electricity in a cold snap and lack of wind next month as an abnormally high number of the country’s nuclear reactors are halted for maintenance, the country’s grid operator said. More than a quarter of the 56 atomic reactors are currently halted because the coronavirus pandemic has disrupted the utility’s maintenance program.

In Germany, deposits up to 100,000 euros are secured by law. Higher amounts are secured through the Association of German Banks (BdB). For individuals, the secured amounts will be limited to 5 mln from 1 January 2022 and they will reach 1 mln by 2030. For companies, the amount will be slowly lowered from 50 mln to 10 mln by 2030.

Supply has not been able to keep up due to years of lower investments in fossil fuels. Europe’s renewable energy sources have struggled with low wind speeds. German power for next year reached €192 MWh. As utilities burn more fossil fuels, carbon prices surged to a record €90.75/t, with options traders betting prices will hit €100/t by the end of 2021.

Bond investors are reacting to higher inflation: across 35 economies, 5-year bond yields have risen by an average of 0.65 percentage points in the past 3 months. In OECD countries, inflation rose to an uncomfortable 4.6% year on year in September. Real bond yields, after accounting for inflation, are -1%, within spitting distance of record lows.

IOSCO, which groups watchdogs from the United States, Europe, Asia and elsewhere has published recommendations which its members are obliged to apply when scrutinising how asset managers sell funds which tout ESG good practice, with the value of such funds hitting a record $3.9 trillion at the end of the third quarter, Morningstar data shows.

A modest rise in yields that inflicts trillions of dollars in losses. The potential for steep losses is a legacy of the tilt toward longer-term borrowing during the era of historically low rates. The higher duration is, the larger the drop in prices. With a half-point increase in yields, the hit to the $68 T Bloomberg Global Aggregate Index would be around $2.6 T.

Green bonds trade less often than corporate bonds in general and tend to yield about 0.04 percentage point less. If many investors decide to liquidate their holdings, they may be disappointed by demand in the secondary market. Bank of England will likely cut its target for corporate bond purchases in the energy sector as it implements measures to greenify QE.

Energy analysts argue that the European Union moved too quickly away from fossil-fueled power, before ensuring that sufficient renewable sources could take up the slack in an emergency. Caught halfway in a transition that should take decades, they say, Europe is now scrambling to find coal and gas to burn in its remaining traditional power stations.

Spain has called for a change to the EU’s marginal pricing system and for a common EU approach, including natural gas purchases and strategic reserves. It has pushed back against electricity companies’ challenge to Madrid’s €3bn levy on their “windfall profits”. Some EU leaders are calling for the bloc to reconsider decarbonisation plans.