Question: Suppose Baa-rated bonds currently yield 6%, while Aa-rated bonds yield 4%. Now suppose that due to an increase in the expected inflation rate, the yields

Suppose Baa-rated bonds currently yield 6%, while Aa-rated bonds yield 4%. Now suppose that due to an increase in the expected inflation rate, the yields on both bonds increase by 1%.

a. What would happen to the confidence index?

b. Would this be interpreted as bullish or bearish by a technical analyst?

c. Does this make sense to you?

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