Markets shrugged off moves by some major central banks to wind back stimulus over the last quarter: global financial conditions paradoxically eased further amid heightened concerns about overvalued asset prices. Continued low bond yields and low volatility, particularly in the United States, are reminiscent of the bond market "conundrum" referred to by former US Federal Reserve Chair Alan Greenspan in 2005, when market yields remained low despite Fed rate hikes. Easier US financial conditions coincided with a decline in the term premia components of yields, or the extra return investors seek for holding a longer-term bond rather than shorter ones. For asset pricing, there are lingering uncertainties about how precisely this compression works over time, or how yields would react once central bank policies normalise. "Can a tightening be considered effective if financial conditions unambiguously ease? And, if the answer is 'no', what should central banks do?" asked Claudio Borio, Head of the Monetary and Economic Department. "In an era in which gradualism and predictability are becoming the norm, these questions are likely to grow more pressing."