The correlation between US and German long-term interest rates should not be forgotten

German long-term interest rates have declined for several reasons: The ECB’s announcement that monetary policy would remain expansionary (no interest rate hike , TLTRO, support for banks); Concern ov er the euro zone’s cyclical situation; The fall in expected inflation in the euro zone. But it is important to not overlook the correlation between US and German long-term interest rates. The Federal Reserve has also signalled a more expansionary monetary policy, which investors have interpreted as an announcement of a reduction in the Fed Funds rate. This has driven down dollar long-term interest rates and reinforced the decline in euro long-term interest rates. The Federal Reserve is undoubtedly ready to lower its interest rates sharply if the dip in US growth gathered momentum (which is not our main scenario).