Other regions’ excess savings should not be overlooked when considering US long-term interest rates

Despite very low interest rates, there are excess savings in China, the euro zone and Japan. As interest rates are low in all these regions, the United States is able to finance its external deficit by attracting these regions’ excess savings also at low interest rates. The flattening of the US yield curve is therefore linked to the situation of excess domestic savings in major regions, despite their low interest rates.