Global financial markets have exhibited increased volatility this year, with large fall in asset prices followed by large rises.

a) If equities arbitrage with bonds and other assets so, overall, their yields tend to move up and down together,briefly offer an explanation as towhy the initial declines in US and Australian equity prices were accompanied by declines in long maturity bond yields.

b) When pessimism about future yields or borrower defaults sees funds with drawn from equity and bond markets,briefly explainto which asset markets you think portfolio managers retreat.