In a recent paper, Emanuel Mönch and his co-authors examine bond holdings of more than 4,500 German retail and institutional investment funds.
They find reach for yield in response to low rates to be pervasive and also document a persistent feedback of funds’ buying pressures to bond prices.3 Given such evidence, it seems plausible that the comparatively high valuations in some asset markets in the euro area are being driven, in part, by the low level of policy rates.