Ground Floor: In the last month or so we've seen a dramatic steepening of yield curves as traders begin to look for higher returns for holding longer-dated paper.

The fact that 10-year money is getting more expensive is what has caused some economists to point out that fixed-rate mortgages are going to get more expensive too.

Naturally, potential house purchasers are not entirely convinced about the sudden concern that they should think about fixing their mortgage.

Many of them remember when they were urged to fix rates at 6-7 per cent or 5 per cent and were told they were getting a really good deal.

But it's certainly true that yields on government bonds, which in turn affect yields on all borrowings, have gone up in the last month.

And that's mostly to do with the perception that the Fed might have done as much as it's going to do with interest rate cuts, despite tantalising innuendos from Fed governor Ben Bernanke that it would cut rates to zero if necessary.

There was a view too that the Fed itself would buy back some bonds thus providing a steady demand for them. But that view has waned since Alan Greenspan's last testimony, as has the feeling that deflation was worrying him.

Mr Greenspan seemed to feel that businesses and households were fundamentally okay, while agreeing the economy was not making a convincing recovery.

At the same time there is a more consistent view that the US is edging its way towards growth, which is leading investors to be less nervous about equity markets.

This has been highlighted by a drop in the Vix, the Chicago Board Options Exchange's Volatility Index. The Vix is one of those contrarian indicators. When it goes up, the market is panicking.

A drop means people are getting more and more optimistic about their holdings.

The reason it works like this is because the Vix measures the implied volatility in the S&P 100 index - in other words, it measure how skittish investors think markets will be.

Obviously, when they're totally panicked, they hedge their positions with options, pushing up the prices of those options which also pushes up the implied volatility.

When investors are chilled-out about things they don't bother hedging so much and the options prices fall again.

Anyway, last week the Vix reached a low of 19.63 and commentators were wondering if investors hadn't lost the run of themselves and whether, with the Dow up over 11 per cent on the year to date, we haven't got as much as we're going to out of it.

(I wish, of course, that the managers of my pension fund were invested in tracking the Dow. Sadly the fund that should have supported an idyllic lifestyle on a sun-soaked beach has made little progress this year.)

The thing is, though, because more and more people are having a pop at equities again, bonds are less fashionable and so yields have begun to go back up.

At the same time, US jobless figures - so disappointing recently - were unexpectedly good, down to 380,000 from a revised 415,000 the previous week.

Analysts had expected them to remain around this number.

The result of these numbers was to ease deflationary fears and push 10-year yields in the US back up over 4 per cent.

As rates in the States moved higher, so did rates everywhere else.

The question is whether or not they will remain at these levels - in which case economists are right to suggest that borrowers think about fixing mortgages - or whether the excitement over the jobless claims and the performance of equity markets will both suddenly dissipate, leaving investors to decide once again that bonds are the best bet in the longer term.

Obviously, if I could answer that question the idyllic island would be fact not fantasy.

But there are still concerns about jobless claims in the US.

The numbers have been quite erratic - moving from record highs to lows in just over a month.

Although the numbers are seasonally adjusted, sometimes those adjustments don't wash through in the way people expect.

Many are worried that good numbers last week can be overshadowed by poorer numbers now.

But the trend has certainly been more positive, which is a good thing for unemployment in the world's leading industrialised nation.

But others fear that all that's happening is that fewer people are being made unemployed but that real and sustained growth in jobs has yet to happen.

There are still concerns about equity markets too. Although the worst of the worst seems to be over, there's a reticence about putting money into stocks, which will take a long time to change.

Sure, the professional investors have bitten the bullet and moved some funds from bonds to equities, but they're having trouble enticing new money into the funds and without fresh cash to invest any rally can peter out.

And in the meantime borrowing money is cheaper in Europe than in either Britain or the US.

The cloud hanging over corporate behaviour remains. US prosecutors are investigating MCI (formerly WorldCom) on accusations that the telecom firm defrauded other telecoms over the last 10 years.

The firm has admitted overstating earnings by $14 billion, leading to ultimate bankruptcy and its restructuring.

The current allegations involve disguising long distance calls as local, so there was no payment of access tariffs to other carriers.

The firm has suggested that the accusations are merely attempts by rival telecoms to confuse issues about its bankruptcy and has said it will co-operate with the inquiry while conducting its own internal investigation.

Expect things to stay dirty for a while longer.