As for the implications for interest rates, they are quite clear:
In an ultra low interest rate environment (short and long-term rates), it’s possible to carry this debt in a low growth environment but with little deleveraging taking place it creates a fragile environment that leaves these economies vulnerable to shocks and policy errors.
If rates were to rise notably from these ultra low levels, this could be just such a shock. This is why in spite of the recent sell-off, rates are likely to stay lower for longer as the alternative could be highly destabilising given the extreme debt burden being carried across large parts of the world.
Or, said otherwise, once the 10Y drifts ever higher and breaches the proverbial 3.50% "Disorderly Rotation" level, that will be precisely the level at which Bernanke will have no choice, liquidity implications for the TSY and repo markets be damned, but to give up on forward guidance and step right back in. One wonders how long until bond traders realize just this and call his bluff.
Source: Deutsche Bank
Credit Zero Hedge