Taken together, regulatory factors can to some extent explain why some investors seem relatively price-insensitive with regard to their demand for safe short-term government bonds. This can best be seen by those who do have an economic alternative: euro area banks with access to the deposit facility.
Recall that German three-month and six-month bills currently trade around –1%, well below the rate on the deposit facility. The fact that banks still hold sovereign bills strongly points to a non-pecuniary motive. Flight to safety Let me now turn to the second factor: flight to safety.