What is show is the yield on different maturities of U.S. Treasury debt, against their maturity length.
A couple of points stand out:
- Policy effects are mostly on short-term rates (the left side of the graph).
- The long-run yield is fairly constant at just over 4% (the right side of the graph)
- What happened with Bernanke-Paulson policy in 2008 was that they were pulling down short-term rates so hard and so fast that their link to medium-term rates was broken.
- There never is much of a link of short-term rates to long-term ones, so there way nothing there to break.
- Given the dependence of most firms on medium-term debt, it should be no surprise to anyone that when the benchmark of medium-term government debt lost its anchor, that commercial markets went nippy.
Via James Hamilton at Econbrowser who notes that the source authors (Gurkaynak and Wright) notice a breakdown in arbitrage: dots on the graph should not separate vertically. This is what is going on in my last bullet point.