In the US, the interest rate on government bonds now rises from 1.80 at five years to 2.86 for 10 year bonds and 3.70 for 30 year bonds.

Interest rates on government bonds were racing upward.

Long term interest rates for Italian government bonds declined from about 12 to about 4 in the ten years from 1994 95 to 2004 05.

The current small difference between the real interest rate on such bonds (2.1 for 30 year bonds) and the nominal interest rate on conventional 30 year Treasury bonds (now 4.6 ) implies that the market expects only about 2.5 inflation over the next three decades.

More likely would be an IMF organized restructuring of the existing debt, swapping new bonds with lower principal and interest for existing bonds.

Assume that the interest rate on ten year bonds remains unchanged for the next five years and then rises from 2 to 5 .

Investors naturally respond to unsustainable debt by selling bonds until interest rates become ridiculous.

An expectation that interest rates will be high sometime in the next decade should mean high interest rates on long term bonds today.

New bonds, on which interest was back loaded, could be given the same accounting value as old ones on which interest was paid earlier.

The ECB s announcement of a new program to purchase sovereign bonds has lowered market interest rates.

The higher interest rates would also apply to corporate bonds and bank loans, weakening business investment.

Investors are buying long term bonds at the current low interest rates because the interest rate on short term investments is now close to zero.

NEW HAVEN Real long term interest rates that is, interest rates on inflation protected bonds have fallen to historic lows in much of the world.

Alternatively, low interest rates could push her (or her pension fund) to buy risky long maturity bonds.

Domestic deflation means that the real interest rate on Japanese bonds is higher than the nominal rate.

But, because Greek euro bonds were regarded as a close substitute for other countries euro bonds, the interest rate on Greek bonds did not rise as Greece increased its borrowing until the market began to fear a possible default.

(Over the course of the euro s first decade, interest rate spreads between ten year government bonds nearly disappeared.)

Indeed, the interest rate on inflation protected bonds has now become 0.5 , even for a five year maturity!

It has no choice the seven year notes are the shortest duration Treasury bonds that now pay interest.

If foreign holders of dollar bonds become concerned that the unsustainability of America s situation will lead to higher interest rates and a weaker dollar, they will want to sell dollar bonds.

The substantial surge in the interest rate on Greek bonds relative to German bonds in the past few weeks shows that the market now regards such a default as increasingly likely.

The fundamental benchmark interest rates in modern financial markets are the so called risk free rates on government bonds.

CAMBRIDGE Long term interest rates are now unsustainably low, implying bubbles in the prices of bonds and other securities.

Investors are buying long term bonds at the current low interest rates because the interest rate on short term investments is now close to zero. In other words, buyers are getting an additional 2 current yield in exchange for assuming the risk of holding long term bonds.

The low interest rate on long term Treasury bonds has also boosted demand for other long term assets that promise higher yields, including equities, farm land, high yield corporate bonds, gold, and real estate. When interest rates rise, the prices of those assets will fall as well.

In this case, the price of loanable funds is the real interest rate. An expectation that interest rates will be high sometime in the next decade should mean high interest rates on long term bonds today.

Holders of both state and federal bonds were thus offered a basket of long dated bonds, some with an interest rate of 3 , and others with 6 (with a ten year grace period).

If Greece had remained outside the eurozone and retained the drachma, the large increased supply of Greek bonds would cause the drachma to decline and the interest rate on the bonds to rise.

But now interest rates for Italian and Spanish government bonds are on the rise again, closing in on about 6 .

But German, French, Spanish, and even Greek bonds all carried roughly the same interest rate, so they were deemed equivalent.

The low interest rate on long term Treasury bonds has also boosted demand for other long term assets that promise higher yields, including equities, farm land, high yield corporate bonds, gold, and real estate.

Their use ought to be confined to those who have an insurable interest in the bonds of a country or company.

That predictable dollar decline makes the relative return on holding dollar bonds even lower than the interest rate differential alone implies.

In 1985, the interest rate on ten year Treasury bonds was 10 , even though inflation had declined to less than 4 .

The greatest risk to bond holders is that inflation will rise again, pushing up the interest rate on long term bonds.

Confidence would gradually return, yields on outstanding bonds would decline, banks would no longer be penalized for owning Italian government bonds, and Italy would gradually regain access to the market at more reasonable interest rates.

Yields on ten year US bonds are now 2.94 , a 58 increase since the first quarter of this year, causing the interest rate gap between two and ten year bonds to widen to 248 basis points.

So nothing stopped the banks from selling lemon bonds.

That expected inflation rate is consistent with the difference in interest rates between ordinary US government bonds and Treasury Inflation Protected Securities.

In short, QE lowering long term interest rates by buying long term bonds and mortgages won t do much to stimulate business directly.

QE2, in which the Fed bought long term government bonds, did not have a discernible effect on long term government interest rates.

If interest rate spreads on Spanish and Italian government bonds are any guide, bondholders are no longer betting on a eurozone breakup.

Investors would be able to buy Guatemala s coffee bonds, Côte d Ivoire s cocoa bonds, Liberia s rubber bonds, Mali s cotton bonds, and Ghana s gold bonds.

Indeed, the US stock market and many others have rebounded more than 100 since the lows of 2009 issuance of high yield junk bonds is back to its 2007 level and interest rates on such bonds are falling.

That s why market interest rates on privately held Greek bonds and prices for credit default swaps indicate that a massive default is coming.