A little panic: Long-term interest rates on risk-free bonds fall. A lot of panic: They rise

If there is a little panic in financial markets, investors switch from risky assets to risk-free bonds, and this leads to lower long-term interest rates on these bonds. But if there is a lot of panic in financial markets, retail savers want to switch to cash, they sell other assets, financial intermediaries face withdrawals, and sell risk-free bonds because they are liquid to get cash, leading to a rise in long-term interest rates on such bonds. This was seen in early summer 2008 during the subprime crisis and in early spring 2020 during the COVID crisis .