It has been identified that there is an importance in the relationships between bond characteristics such as coupon rate, time to maturity and yield. A further issue of importance to market participants is the long-term relationship between bonds of different credit (risk) classes, different maturities and in different markets.

a.Why is it important to understand the long-term relationships between bonds with different risk classes and different maturities?

b. What does this paper conclude about the relationship between Australian dollar euro-bonds and Australian government bonds?