Lower for Longer Is Likely

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The chart shows a simulated 10-year forward evolution of debt-to-GDP ratios as a function of increasing longer-term rates: the higher the debt-to-GDP ratio, the stronger the impact of rising rates. In the case of Italy, a 1% increase in rates would lead to an increase in the debt-to-GDP ratio of 15% in 10 years. Even if not as extreme as Italy, the US would see their debt ratio rise by 11%. Think of the actions of the BoJ over the past 20 years: a strong indication for investors regarding the future of monetary policy, with low long-term rates for longer as nobody can afford higher rates.


20201007 chart website_Lower for Longer Is Likely
Source: Bloomberg, Unigestion. Data as at 30 September

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