On August 2, 2022, the ten-year United States Treasury yield was 0.5 percent; on October 9, 2023, it had risen to 4.8 percent. Long-term interest rates in Europe, Asia, and Latin America have also risen sharply. The key reason for the rise in capital market interest rates is the central banks' interest rate hikes—a direct response to sky-high inflation (caused by the central banks themselves, following a huge increase in the quantity of money).

Figure 1: Ten-year US Treasury bond yield with constant maturity from January 1981 to October 11, 2023 (percent)

Initially, financial markets expected only a relatively short phase of increased interest rates. At the beginning of March 2022, the US long-term interest rate fell below the short-term yield—so the yield curve became "inverted," a clear indication that investors expected short-term interest rates to be cut sooner rather than later.