Headlines this week said that Spain and Germany's sovereign bond interest rates are now so low, that they broke records set 200 years ago. My question is, why did the economic/political climate back then, cause rates to be extremely low? And what changed subsequently, that caused rates to revert to more normal levels?
Peace had broken out after the Napoleonic wars. (Of course, Napoleon was going to return from Elba and re-start them, but this was not known.)
Risks were perceived to have plummeted.
Europe was essentially on the gold standard (supported by Britain), so inflation was non-existent.
Thus, in a brief period of euphoria, interest rates were low.
Risks re-appeared, and interest rates did not remain so low for long.