"But rising rates and falling prices are not necessarily coming so soon, according to Wharton finance professor Franklin Allen, who notes that short-term rates in Japan have stayed extraordinarily low for many years."
Japan's recently elected prime minister campaigned on a platform that includes increased government spending and Japan's central bank targeting higher inflation, which should result in rising rates. In fact it has, as well as a rising stock market.
"Uncertainty drives investors to pursue safety, which pushes businesses, individuals and foreign governments to stock up on U.S. Treasury securities, the modern world's safe haven. The Treasury market is big enough to soak up worldwide demand, and safe because it is backed by the government's power to tax. High demand has driven bond prices up and forced yields to extraordinary lows."
Uncertainty and lack of attractive alternatives have pushed investments in treasuries, as well as the government bonds of every major country which issues debt in a currency it controls. High demand and low supply has pushed up prices. If supply increased to meet demand, prices would not have risen the way they have. BTW, when do we ever not have uncertainty?
"Rising rates would also be hard on U.S. taxpayers, who would have to pay more to finance the government's $15 trillion debt."
We're not likely to see rising rates until the economy recovers. At that point there will have higher incomes, resulting in higher after tax incomes.
"But long-term rates are in part a bet on what short-term rates will be in the future, so the Fed's downward pressure on short-term rates puts downward pressure on long-term ones as well."
The idea of low rates is to increase economic activity. Higher economic activity raises rates. If the Fed succeeds in helping to grow the economy, long rates will rise.
"But bond investors could be hit hard, analysts note, as higher yields on new bonds would drive down values of older, stingier bonds already in investors' portfolios. The great bull market could turn into a great bear market."
If you are reinvesting cash flow (dividends and principle), higher yields result in higher returns over time, despite the short term pain of lower asset values. Those who are investing for the long-term are helped by higher rates, not hit hard.