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Baa yield
Aa yield
Yield change
Suppose Baa-rated bonds currently yield 7%, while Aa-rated
bonds yield 5%. Now suppose that due to an increase in the
expected inflation rate, the yields on both bonds increase by 1%.
What would happen to the confidence index? Would this be
interpreted as bullish or bearish by a technical analyst? Does
this make sense to you?
This Year Last Year
Yield on top-rated corporate bonds
Solution
Yield on intermediate-grade corporate
bonds
Given the data on bond yields, is the confidence index
rising or falling? What might explain the pattern of yield
changes?
