Policy rates → German 10-⁠yr yield

Common explanation (Cause · same direction): Policy rates set the short end and pull long-term rates along (ECB → German bonds).

This issue: Policy rates at 85 (hot), German 10-⁠yr yield at 100 (hot) — both above normal, in line with the common explanation.

Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.

Where it stands now

Where the two indicators stand this issue

Policy rates: Median position across economies 85. German 10-⁠yr yield: 2.43 percentage points above its 10-year average.

Tests

Does this link hold up?

Common explanationPolicy rates set the short end and pull long-term rates along (ECB → German bonds)Source: European Central Bank, “Transmission mechanism”.
Tested against our dataAgreement between the positions of Policy rates and German 10-⁠yr yield (3-month lag), measured in the direction of the common explanation: +0.40. Looking at every 5-year period (shifted one year at a time), the two moved in that direction in 6 of 12; data start only in 2009. Weak or inconsistent
Periods when it did not holdAcross 12 5-year periods, out of step in 2009⁠–⁠2022.

History

The two lines, overlaid

Data: Bank for International Settlements (BIS), central bank policy rates; Taiwan: Central Bank of the Republic of China (Taiwan); European Central Bank (ECB), long-term interest rate statistics. Positions: our calculation.

Policy ratesGerman 10-⁠yr yield

Limits

What this card cannot tell you

Moving together does not prove that one causes the other.
Links change over time; periods when this one did not hold are listed in full.
This is the historical record, not a forecast.

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