Markets think interest rates could stay high for a decade or more

NOT LONG ago, as interest rates in the rich world hovered near zero, economists debated whether their downward march was the product of a decades-, centuries- or millennia-long trend. Now the burning question is how long they will stay high. On October 18th the ten-year Treasury yield, which incorporates long-term expectations for interest rates and was below 1% as recently as 2021, hit 4.9%, its highest since 2007. The 30-year Treasury yield crossed 5% the same day. Analysts at Bank of America may have sounded a little breathless when they declared last month that rates were “coming off 5,000-year lows”.  But that is indeed how it feels to economists, investors and anyone in the uncomfortable position of servicing debts they incurred when almost everyone expected rates to be low for ever.