The quotation following is from an article titled "Spanish Bonds to Be Tops" that appeared in the March 4, 1991, issue of BondWeek: The Spanish bond market will be one of the best performing European markets this year due to its relatively high yields, a strong peseta [the Spanish currency] and moves by the Spanish government to liberalize the market, according to analysts. The Spanish government's recent move to lower short-term rates from 14.7% to 14.5%, hold monthly auctions and abolish the 25% withholding tax on bonos (government bonds) for non- residents has also helped increase liquidity in the market, they said. Explain why the relatively high yields, a strong peseta, and the government's lib- eralization policies will contribute to the projected favorable performance of the Spanish bond market cited in this quotation.

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