Natixis - Is it a good idea to create an artificial scarcity of risk-free debt in the euro zone?

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Natixis

Patrick Artus

Is it a good idea to create an artificial scarcity of risk-free debt in the euro zone?

The world is chronically in a situation of ( ex-ante ) excess savings and strong demand for risk-free bonds. The euro zone also has a structural situation of excess savings and a preference for risk-free assets. When the ECB, through its purchases of public debt, reduces the amount of public debt available to investors/savers, it then creates an artificial scarcity of risk-free bonds when demand is strong. The result then is: Abnormally low (negative) long-term interest rates; A forced switch by savers to riskier assets, which do not match their preferences, and therefore probably a loss of well-being.

06/01/2021 6 EN

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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.

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Analysts

Patrick Artus

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Is it a good idea to create an artificial scarcity of risk-free debt in the euro zone?

Where does China stand following the trade war truce?

France, second highest public spendings in the euro area: where do the differences with the others come from?

France, vice-championne des dépenses publiques en zone euro : d’où proviennent les écarts avec les autres pays ?

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