Meanwhile, borrowers adjust their demand for funds based on their changing assessment of the risks and expected returns of their investment projects. When desired saving rises or investment  -9demand falls, then long-term interest rates will decline. Today’s very low level of longterm rates suggests that both of these factors are at play.
The first is the profitability of financial institutions that systematically borrow short and lend long. These so-called leveraged institutions are credit companies that borrow by issuing short-term liabilities and use the proceeds of their borrowing to lend over the longer term, or to purchase assets that have a longer maturity.