Report
Size of the supply of "safe" bonds and real interest rates on "safe" bonds
The world expresses demand for safe bonds, which can be estimated to be proportional to income or wealth. We define safe bonds as government bonds issued by countries where sovereign risk premia are very low and where international ownership of government bonds is high: United States, Canada, United Kingdom, Germany, France, Netherlands, Austria, Finland, Belgium, Australia, Sweden, Denmark. We can then examine the weight of the available stock of safe bonds relative to global GDP or global wealth. If this weight declines, it is likely that there is a chronic situation of excess demand for safe bonds, and that this explains the decline in real interest rates on these bonds. We believe it is likely that the decline in the weight of the supply of safe debt in wealth (in a portfolio choice logic) has driven down real long-term interest rates.
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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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