Investors looking for a safe way to beat inflation don’t have to look very far anymore.

Real yields—a measure of the stated return on Treasury bonds, minus inflation—climbed to heights not seen since 2009. Based on 10-year Treasury inflation-protected security yields, real rates (as they are also known) hit 2% in the U.S. before finishing August around 1.86%.

Higher real yields are good news for savers, but the picture gets more complicated as they ripple through the markets and the economy. They reflect the fact that borrowing is getting more expensive, which tends to slow growth. And higher real yields tend to drive investors into cash-like products such as money-market funds and out of riskier assets, from stocks to cryptocurrencies to gold, which can have an economic impact, too, if that movement goes on long enough.

The strength of the U.S. economy, a wave of Treasury debt sales and prospects that the Federal Reserve could keep rates higher for longer have lifted nominal yields in recent months.

The benchmark 10-year yield recently climbed to 4.340%, its highest since 2007. Meanwhile, inflation hit 3.2% in July, near its slowest pace in more than two years.

Presto, higher real yields.

Who benefits from rising real yields?

Savers are benefiting from the return of a normal-looking economy. Cash-like investments such as money-market funds, short-term Treasurys and certificates of deposit now protect investors’ cash from rising prices and earn them returns in the process—something those products didn’t do for years after the financial crisis of 2008.

Real yields were very low or negative throughout most of the postcrisis period, including a stretch during the pandemic in which the negative return was a percentage point. That meant investors lost money as inflation ate away at funds held in cash, prompting them to take on risk in other markets.

Now, a record number of consumers are turning to money-market funds, which typically invest in T-bills or park cash at the Fed, to take advantage of rates above 5%.

Who doesn’t benefit from rising real yields?

Some analysts have chalked up the stock market’s August slump to rising real yields, which have often played a role in slowing bull markets.

There are reasons for this relationship, from both the corporate and investor points of view. As it costs more to borrow cash, some companies might struggle to stay afloat and others might become less willing to finance new projects, a factor that could hurt future earnings and weigh on economic growth. For investors, higher rates mean a higher discount rate gets applied to future cash flows—making valuations in the stock market look a little more stretched.

The S&P 500 () slid 1.8% in August. The tech-heavy Nasdaq Composite () slumped 2.2%. Both indexes are on track to snap five-month win streaks after being down by 4% or more midway through August, until air came out of real yields’ rise. More speculative assets suffered worse: Bitcoin is down 11% this month, and gold has slipped 1.6%, having to compete with Treasurys as a haven.

Could real yields become a real problem in the stock market?

There is some concern that higher real yields could result in an unexpected financial calamity. One such episode was seen when several regional banks failed in March, thanks largely to their poor management of the risk that interest rates would rise sharply.

Another likely victim of real yields comes from the history book: The collapse of the dot-com bubble in 2000 didn’t have a clear precursor, but many investors said at the time that the market was bound for a correction, thanks in part to real rates moving higher.

“With the [economic] data coming in so strong, real yields keep pressing higher, which raises the chance that something ends up breaking, as has usually occurred during previous Fed hiking cycles through history,” wrote Deutsche Bank analysts.

Where are real yields headed?

Real yields are likely to continue surging, analysts say, should the central bank maintain higher interest rates as inflation falls. Some investors believe this is likely because of the signs that many people are already expecting more inflation in coming years.

A University of Michigan survey shows consumers foresee inflation of about 3% in the long run. A market gauge of those expectations is also rising. Over five to 10 years in the future, investors see inflation at around 2.36%, measured via nominal and inflation-adjusted Treasury yields. From 2016 to 2021, markets saw long-run inflation below 2%. This year’s jolt has long-term inflation expectations at heights not seen since nearly a decade ago.

When trying to divine the future path of the economy, some on Wall Street turn to an esoteric measure known as the five-year, five-year forward inflation expectation rate, a measure of the average expected inflation over the five-year period that begins five years from now.

What might happen next with real yields?

Fed Chair Jerome Powell said on Aug. 25 that the central bank is likely to hold rates steady for now, though he kept the door open to raising them later this year if the economy doesn’t slow enough. Odds of the Fed raising interest rates further are a coinflip in futures markets, where traders are betting on roughly a percentage point of rate cuts in 2024.

But the market has generally been overly optimistic about the rate picture this year. At the same time, a number of officials are concerned that lifting rates too high could send the economy into recession, an outcome they view as unnecessary. They want to make sure the Fed doesn’t go too far.