10 Year Government Bond Yields
United States	0.68 %
Canada	0.76 %
Mexico	7.30%
Switzerland	-0.38%

a) Assuming that bond rating agencies, such as Moody's and Standard & Poor's, have rated the government bonds of the US, Canada, Switzerland, and Germany free of risk of default - with a grade of AAA - What is the theory behind the apparent differences between, the US bond rate on the one hand and the Swiss bond rate and the Canadian bond on the other hand? How about the apparent difference between the US bond rate and that of Mexico's if Mexican Bonds are ranked riskier than that of the US?

(b) The left vertical axis indicates the difference between the 2-year German bund rate and the 2-year US treasury bond rate, shown in black, while the right vertical axis indicates the rate of exchange defined as the number of US dollars per one euro, shown in blue.

What pattern do you observe as displayed by the above chart and why?

-2Yr German Bund/TBond Diff v/s EURUSD -2Yr German Bund/TBond Diff v/s EURUSD