Report
Central banks have the capacity to keep interest rates much lower than the growth rate. The resulting possibilities for arbitrage will eventually create huge imbalances
The expansionary monetary policies in OECD countries make it possible, even in the long term, to keep short - term and long - term interest rates markedly lower than the growth rate. This creates a considerable possibility for arbitrage: borrowing to buy real assets whose return is related to the economy's growth (equities, real estate, etc.). Even though high risk aversion and risk premia can curb this move in the short term, in the long term we should expect, if interest rates remain lower than the growth rate: A considerable increase in debt leverage; A significant rise in asset prices.
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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.
Patrick Artus
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