Report
What determines the yield curve slope in the United States and the euro zone?
Many investors still believe that the slope of the yield curve varies with expected future growth. But this has not been the case since the 1990s. We therefore examine what does determine the slope of the yield curve. Possible candidates are: Expected or actual inflation; The level of the short-term interest rate; Risk aversion; The fiscal deficit; Non-resident bond purchases; Central bank bond holdings. The following have a significant effect on the slope of the yield curve: In the United States, expected inflation (positive) and short-term interest rates (negative ); In the euro zone, expected inflation (positive), short-term interest rates (negative), fiscal deficits (positive) and central bank bond holdings (negative). Going forward, t his points towards a flattening or inversion of the yield curve.
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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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