Initially Baa-rated bonds yield 7%, while Aa-rated bonds yield 4%.

Now suppose that due to an increase in market uncertainty, investors become more willing to buy safer bonds and sell riskier bonds. How might this demand shift affect the prices and YTM of the above bonds? Why?

If the yield of safer of the above bonds increases by 1% and yield of riskier bonds decreases by 1%. What are the new yields?

Is such change consistent with the story above? Why?

What would happen to the confidence index? Change from _______________ to _______________

Is such confidence index change considered bullish or bearish?