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Can we explain the very low level of euro long-term interest rates?
Long-term interest rates in the euro zone have fallen back to an extremely low level in the spring of 2019, while the ECB is no longer buying euro-zone bonds in net terms . Who are the buyers of euro-zone bonds at these depressed interest rate levels? Since the end of 2018, it has primarily been non-residents, who are buyers of bonds and sellers of equities in the euro zone. Why are non-residents behaving like this? If they expected the euro to appreciate, they would also buy equities; Perhaps some investors want to reduce their exposure to the dollar, for economic (US external debt) or political reasons. Non-residents’ bond purchases in the United States are nevertheless very positive. Perhaps non-residents expect an even greater fall in euro long-term interest rates caused by a major recession in the euro zone. Yet, long-term interest rates are expected to rise slightly.
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Natixis
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Patrick Artus
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