Our proprietary long-term sovereign yields model points to a persistently low interest rate environment over the next few years; the massive, prolonged intervention of central banks on global government bonds will remain a major factor.

However, the additional flows of risk-averse private financial savings will also exert a remarkable downside pressure on long-term yields. In the Eurozone, the cumulative flow of private financial savings has so far exceeded the volume of QE. We expect the rapidly growing amount of fresh financial savings not to be matched by a proportional increase in the free float of safe assets.

As to metrics of public debt, our research suggests that they do not have explanatory power on yield levels in developed markets in the medium term.

We believe there are only two possible scenarios in which long-term yields could possibly see a significant rise: an inflationary shock or a monetary policy error. But even in these cases the increase would be limited. For the 10y German Bund the yield would rise to around 0%; for 10y U.S. Treasuries the yield would increase to 1.8 to 2.0%.

As for Euro sovereign spreads, they have also become much more sensitive to the interventions of the central banks and private sector savings than to any debt-related factor.