Long and short-term interest rates in the eurozone and the US will likely stay low for "the next several years", according to Moody's Investors Service.
In a major report, the ratings firm says that 10-years of recovery following the global financial crash has left the world locked in a cycle of slow growth and low inflation expectations, while sovereign borrowing rates have slumped even in countries carrying large debts.
It points out that the German 10-year bond is trading at "an unusually low" negative rate and "a number of countries, including Japan, Germany, France, the Netherlands, Denmark, Sweden, and Switzerland, have long-term sovereign nominal bond yields close to zero or in negative territory".
"What makes this situation remarkable is that unprecedented monetary policy accommodation in the form of a multiyear period of near-zero interest rates and large-scale asset purchase programs by major central banks have aided economic and labour market recoveries in advanced economies, but have failed to raise inflation as expected," it says.
However, S&P also says that a major spending programme in Europe to counteract climate change or spending initiatives by governments around the world could help to push up interest rates by reducing savings.
S&P says that persistently low-interest rates will continue to pose challenges for central banks around the world; for governments, as low rates "are masking the credit risks associated with high debt and low growth"; and for lenders and insurers and asset managers because "continued low rates will make the operating environment more challenging".
Financial stability could be threatened as asset managers chase high-yielding investments.
Rising inequality in emerging market economies may be helping to boost savings and therefore suppress investments and an ageing population around the world may be encouraging savings as "the expectation of longer life spans and hence longer retirement periods will raise savings propensity across household cohorts, and will continue to put downward pressure on interest rates", it says.
In the eurozone, S&P predicts that inflation will "very gradually firm from the current subdued level of just over 1% toward 2%, as the expansion continues".
"But even then, we expect both short-run and long-run real interest rates to remain low," it says.