Read the following statements, taken from financial newspapers, and answer the question(s)

below each statement:

A UK bond auction struggled to attract investors on Thursday amid further signs of strains in the gilts market because of the record amount of debt taken on by the government to revive the economy. The poor auction helped trigger a sell-off in the secondary market, and yields on 10-year benchmark gilts jumped 24 basis points to 3.36%. Increasing risk appetite also undermined government bonds (D. Oakley Financial Times, April 2, 2009).

a. What is the interpretation of the inability of the auction to attract investors?

b. Why did the yield on the 10-year benchmark gilt increase?

c. What is the meaning of the last sentence of the above passage?

Treasuries fell across the board as investors cut bond holdings ahead of next week’s auctions after the government reported fewer job losses for March than forecast ( Wall Street Journal, April 5, 2009).

a. Interpret this statement in terms of bond prices and yields.

Just under half of corporate debt in America was rated as “speculative” (BB or below) at the end of last year, according to Standard & Poor’s, a rating agency. The share of junk-bond issuers in the corporate-bond market had risen from a low of 28% in 1992. Most of the increase in junk issuance was in the B category. The increase reflects the expansion of capital markets to embrace more marginal firms ( The Economist, Feb 26, 2009).

a. What is the interpretation of an increase in junk-bond issuance and of the lastsentence statement?