Report
Does non-resident demand for US or euro-zone sovereign bonds depend on their returns?
There are two views on what accounts for non-resident demand for US or euro-zone sovereign bonds: A financial choice linked to the returns on these bonds; Demand for liquid and risk-free bonds, unrelated to expected return. We examine the link between returns on US and euro-zone sovereign bonds and non-resident demand for them. We see that non-resident demand for government bonds: In the United States, does not depend on their return. It therefore depends on risk perception and the liquidity of the market for Treasuries; In the euro zone, in contrast, depends positively on the euro long-term interest rate. The return motive therefore appears only for euro-zone government bonds.
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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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