The very important role of the non-resident position in the euro zone’s financial markets

Since early 2019, non-residents have been large buyers of euro-zone bonds and sellers of euro-zone equities. This non-resident position in the euro zone’s financial markets has major implications: It contributes to keeping long-term interest rates very low and equity valuation low in the euro zone; The fact that non-residents are net sellers of euro-zone assets (equities + bonds) helps to ex p lain the euro’s weakness; Because there is substitutability between the euro zone and emerging countries, this position explains the return of capital flows - especially equity flows - to emerging countries.