Report
Could demand for European bonds have weakened structurally?
W e ask w hat would happen if the ECB stopped buying euro-zone bonds . Would it be easy to find other buyers and avoid a sharp rise in long-term interest rates in the euro zone? Is there still strong global demand for risk-free euro-zone bonds? If the answer is no, then either the ECB will not be able to stop buying bonds, or long-term interest rates will rise sharply in the euro zone. Indeed, t here is reason to doubt the strength of demand for euro-zone bonds: Households hold very few of them directly; Euro-zone banks hold them for regulatory reasons, but do not wish to increase their holdings; Euro-zone institutional investors are shifting their portfolios towards equities and real assets, which they expect to offer high returns; Central banks’ foreign exchange reserves are increasing little and foreign institutional investors prefer bonds denominated in dollars over bonds in euros.
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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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