The relatively subdued response of US Treasuries to the outcome of Wednesday’s FOMC meeting underlines the fact that while monetary policy should provide a firm anchor for long-term yields over the next few years, this prospect is already widely discounted. Nonetheless, we still see scope for the ten year Treasury yield to drop to 1.5% this year (from a little below 2% now) as a break-up of EMU triggers a “flight to safety”.