The herd behaviour of bond buyers in the recent period

The sharp fall in bond yields in the euro zone since the start of October 2023 cannot be based on an analysis of the fundamental determinants of long-term interest rates. Such an analysis would show the significant base effects linked to the fall in commodity (import) prices and the rapid rise in wages and unit labour costs in the euro zone. In reality, we are faced with herd behaviour: the capital gains realised by some investors thanks to the start of a fall in long-term interest rates encourage other investors to buy bonds without analysing their fundamental value.