In Greenspan conundrum redux, odds are on bond traders' side

New York

THE Federal Reserve faces another bond-market conundrum as it prepares to raise interest rates.

Policymakers including New York Fed president William Dudley are suggesting there's something wrong with debt yields that aren't climbing as the economy recovers. Yet, traders are signalling there's little reason long-term Treasury yields can't, and won't, stay depressed.

History is on the market's side. The spread between yields on 10-year Treasuries and the Fed's overnight rate is right where it should be based on past norms. And, in the last four decades, it's …