During a period of rising interest rates, it makes sense for investors to either swap out their longer term bonds for shorter ones, or simply invest in shorter maturity bonds in order to reduce duration, as well as reinvest in higher rates if they occur. However if investors start shifting to the shorter maturity bonds that should cause yields for shorter bonds to decrease. My question is what causes those shorter yields to actually rise, and prevent that demand from causing short term rates to stay artificially low. Is the FED stepping in at that point through FOMC to make sure that rates actually increase?
In addition, why are short term bonds more impacted by changing economic indicators/beliefs compared to longer term ones?