1.

(a). It is known that bond price is determined by bond market. Please list the factors

which can shift the demand curve in the bond market. Please list the factors which can

shift the supply in the bond market.

(b) Please demonstrate graphically and explain the effect in the bond market of a

decrease in the federal deficit. What is its impact on the interest rate and bond prices?

(c)

The figure above shows the yield to maturity of Turkey government long term bonds.

The yield to maturity was relatively stable before Apr 2018. However, there was a sharp

increase in the yield to maturity since Apr 2018 and the increase is believed to be

associated with the economic crisis in the country. Please use a diagram to explain the

increase using the bond supply-demand model.