Dangerous optimism

US bond yields are back to «conundrum» levels. They rose after Alan Greenspan expressed puzzlement at their low level on February 17. But the 10-year yield has fallen all the way back to 4%. So the bond bulls have been right so far in 2005. The bulls have three arguments. First, insurers and pension funds will buy more bonds in order to match their increasing long-term liabilities. But that only works if inflation stays low, since most long-term liabilities increase with inflation. Second, Asia...