Shades of early 2009? The extreme fear may have gone, but with 10-year Treasury yields heading back toward levels last seen as the global-financial system teetered on the brink, the same question has returned to centre stage. Can US policy makers stop the economy drifting towards deflation or will the sheer weight of deleveraging and weak demand be too strong to overcome?

Even as the Federal Reserve signals it is alert to the threat of deflation and is ready to act, bond yields have continued to slide. The 10-year yield, which hit 3.99% in April, now is at 2.61%.