As recently as November 2018, ten-year U.S. government bonds paid an interest rate over 3 percent. That yield gradually fell as the Federal Reserve shifted from a stance of hiking interest rates to cutting them. And in the last couple of weeks, ten-year bond yields have absolutely cratered, falling below one percent for the first time ever. On Friday, they even briefly dipped below 0.7 percent. While the stock-market turmoil has gotten the most attention, these ultra-low yields on safe, long-term bonds are a warning light that the coronavirus situation is likely to have a serious, negative, and persistent effect on the economy.

Long-term interest rates are a barometer of economic-growth expectations. Two reasons that interest rates have fallen so much around the world over the last few decades is that population growth has slowed down and productivity growth has been disappointing. These are both factors that reduce overall expectations of economic growth, and therefore interest rates. When growth is expected to be strong, interest rates tend to go up because demand for investment capital starts to outstrip supply. When the growth outlook is weak, few people are interested in borrowing and investing and so the interest rate — which is effectively the price of capital — falls.