Report
Patrick Artus

At what level will 10-year interest rates be in 10 years?

Financial markets currently expect a modest rise in 10-year interest rates in the next 10 years (we look at the United States and the euro zone). What mechanisms could imply that 10-year interest rates will rise much more on this horizon? Structural inflation factors: reshoring, population ageing, energy transition; Social and political pressure to significantly raise the value of low wages; A fall in the global savings rate due to population ageing. Pure economic analysis therefore leads to expectations of a greater rise in long-term interest rates than what financial markets expect. But given public and private debt levels, such a rise in interest rates would be catastrophic. Should we not then also expect fiscal dominance to continue, i.e. that central banks will conduct a low interest rate policy aimed at preventing a loss of government fiscal solvency? Central banks would then prevent a rise in inflation from having a significant effect on interest rates .
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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