Earlier this year the Federal Reserve committed itself to the rate hiking cycle.
The reasoning was that the Fed wanted to deflate the asset bubbles and keep down price inflation.

The recent rise in the Fed funds rate will likely cause a ripple effect on the borrowing costs for consumers and businesses that want to access credit based on the U.S. dollar.

They've slowly raised rates from zero (ZIRP) to just 1.25%. Still historically low, but enough to make an impact. Right?

Treasury yields slip to fresh 10-month low after ECB news conference

Not only is the long-end of the curve not turning up as the Fed raises rates on the short end of the curve, but yields are actually dropping.

If bond traders were really convinced that the economy was getting stronger, then demand for the super safe assets should soften. Here's something else: the yield curve, or the difference between short- and long-term rates, is shrinking. That typically happens when confidence in the economy is low, because traders don't expect growth to be strong enough to generate faster inflation that would erode the value of fixed payments over time. Indeed, a government report Thursday showed that the Federal Reserve's preferred measure of inflation -- the core personal consumption expenditure index -- rose just 1.4 percent in July from a year earlier, the smallest increase since 2015.
..."Any back up in rates should be viewed as a buying opportunity," Michael Collins, the senior investment officer for fixed income at PGIM, said in an interview with Bloomberg Television. Going forward, 10-year Treasury yields will probably "spend more time below 2 percent than above 3 percent," he said, adding that late cycle economic indicators are starting to build while price wars are breaking out across most all industries.

What happened?
The first problem is that there is no real price inflation. In fact, despite the asset bubbles, there is a danger of deflation.

The key takeaway: negative and near-zero interest rates show central banks’ desperation to avoid deflation. More important, they highlight the bleak state of the global economy.
In theory, low- and negative interest rates were supposed to reduce savings and stimulate spending. In practice, the opposite has happened: The savings rate has gone up. As interest rates on their deposits declined, consumers felt that now they had to save more to earn the same income. Go figure.

Kenneth Rogoff, economist and all-around asshole, says:

"It makes sense not to wait until the next financial crisis to develop plans and, in any event, it is time for economists to stop pretending that implementing effective negative rates is as difficult today as it seemed in Keynes’ time," he said, citing the growth of cashless transactions as a reason to think that negative rates could be implemented more easily in future.

Rogoff is obviously wrong about one thing - negative interest rates (NIRP) are already here. They never left.

What's more, global central banks are running out of QE as well.

“Bond scarcity is increasing in more and more countries,” says Louis Harreau, an ECB strategist at Credit Agricole CIB in Paris. “The ECB will be forced to reduce its QE regardless of economic conditions, simply because it has no more bonds to purchase.”

The ECB is running into the same problem that the BoJ ran into last year.

One long-running concern about the BOJ's quantitative and qualitative (QQE) easing program had been that the central bank, which already owns around 40 percent of all JGBs, would eventually run out of bonds to buy.

In both Europe and Japan, government bonds sometimes don't trade for days. The markets are broken because one buyer dominates the market, and never sells.

What appears likely to happen is one of the most frequent leading indicators of a recession - an inverted yield curve, where short-term borrowing costs are higher than long-term costs.
However, never do yield curves invert at such a low level.

So what we have is an extremely dangerous situation indeed. While record high stock prices have become more detached from economic reality than ever before, the Fed has encouraged debt levels to surge to a record as well. And because robust growth has been absent, the level of the U.S. 10-year Note can't seem to get above 2.5 percent.
...Therefore, unless President Trump can pass his aggressive fiscal stimulus plan imminently, it is likely that the yield curve will flatten out much quicker than at any other time in history due to that current tight spread.
The truth is it will probably only take a handful of rate hikes to cause the yield curve to resemble a very flat pancake. Why is that important? A flat or inverted yield curve has most often led to a recession and carnage in the stock market; just as it did prior to the huge collapse in equities during 2000 and 2008.
Only this go around, when short-term rates rise to meet long-term borrowing costs the ensuing recession will occur with record-low interest rates, unrivaled debt levels, unparalleled real estate prices and unprecedented stock prices.
Bond yields are, historically speaking, "in the basement" and the public and private sectors are already saturated in debt. Therefore, there just isn't much the government can do to encourage another round of debt accumulation to pull the economy out of a death spiral as it did in the wake of the Great Recession.

It matters that the global central banks never exited crisis mode after 2008.