It's almost as if bond traders and economists are watchingdifferent versions of Janet Yellen's testimony to Congress thisweek.

Traders are taking the Federal Reserve chair's comments over thepast two days—that the labor market market isn't fully healed andinflation is too low—as confirmation that the Fed is very unlikelyto raise interest rates in the first half of the year. Economists,including UBS Group AG's Drew Matus and JPMorgan Chase & Co.'sMichael Feroli, saw in her message reasons to reaffirm their callsfor the first increase to come by June.

But there's a third view about how Yellen's testimony applies tothe bond market, as expressed by Jim Bianco, the founder of BiancoResearch LLC in Chicago: It doesn't really matter.

In his alternative scenario, “everybody's right,” Bianco said,in that the Fed could start raising its benchmark rate from nearzero, like economists predict, and yields remain low, like tradersseem to be anticipating.

With almost US$2 trillion of sovereign debt in Europe offeringnegative yields, demand for U.S. fixed-income assets is unlikely toevaporate, regardless of what the Fed does. That demand—coming inpart from overseas—will ensure that bond prices remain high andyields low.

Yields on 10-year Treasuries have dropped to 1.99 percent fromas high as 2.14 percent earlier this month, while rates on 2-yearTreasuries are 0.61 percent, down from a high of 0.66 percent thismonth. Analysts surveyed by Bloomberg expect 10-year Treasuryyields to rise to 2.2 percent by June. But that would only takethem back to the levels they were at in December.

So in the end, so what if Yellen laid the groundwork for policymakers to remove the phrase “patience” from rates guidance whileemphasizing they would still have flexibility as to when they'dmove? Maybe the actions of central bankers in Europe and Japan—whoare pouring cash into their economies that is seeping into U.S.markets—matter just as much right now as what Yellen does.

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