Europe Is Running Out of Safe Assets

Investors have a problem: As the European Central Bank raises interest rates and the eurozone economy edges closer to a recession, they may not have enough places to hide.

Over the past week, markets have started to reflect the 0.75 percentage-point increase in interest rates that the ECB announced earlier in September. The euro short-term rate, or €STR, which tracks the price at which banks lend unsecured money to each other overnight, closed Friday at 0.66%, compared with minus 0.083% before the rate increase.

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