What mechanism might drive up long-term interest rates in the euro zone?

We begin with the different variables that may in theory explain long-term interest rates in the euro zone (we look at the euro zone as a whole and Germany): Expected inflation; Expected short-term interest rates; The size of the ECB’s balance sheet; Excess savings in the euro zone; US long-term interest rates; The level of risk perception; The level of bond issuance. We look at which developments could drive the level of long-term interest rates higher and which ones could drive them lower. The expected euro short-term interest rate point s towards a rise in long-term interest rates ; the increase in the size of the ECB’s balance sheet and the fall in expected inflation point towards a fall in long-term interest rates . We then perform an econometric analysis of the formation of long-term interest rates. Altogether, the econometric analysis surprisingly points to a decline in long-term interest rates from end-2021 to end-2022, the main cause being the decline in expected inflation.