Core euro-zone government bonds have become completely substitutable for money

Sometimes we wonder why investors accept buying core euro-zone government bonds at long-term interest rates close to zero. But it important to understand that core euro-zone government bonds have become substitutable for money if investors believe that core long-term interest rates will remain stable and close to zero, there is no longer any interest rate risk. Core euro-zone government bonds are liquid, risk-free and provide a zero yield: they are therefore equivalent to money and perfectly substitutable for money, and that is why they are in demand.