Where did the bond vigilantes go? (TT Nov05 p10-11)

In the last few years inflation has crept up and fiscal deficits soared, yet the bond market has allowed yields to fall and credit spreads to narrow. The data does not support many of the arguments put forward to explain Alan Greenspan’s “interest rate conundrum”. The answer to disappearing bond market vigilantes and the interest rate conundrum may lie in monetary policy.